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It's time to put the member at the centre of pensions, says Stephen Nichols |
We have all witnessed the demise of final salary schemes over the last decade or so.
With seven out of every ten private sector schemes now closed to new entrants, which increases to eight out of ten when you include those closed to future accrual - where has this left the typical scheme member?
Confused, distrusting and totally disengaged.
However, such negativity commenced long before final salary schemes started the transference of risk to members, as members had already had their confidence tested by:
employers raiding schemes for surpluses;
the Maxwell scandal; and
the mis-selling of pensions.
So, what can be done to turn this around and save pensions?
I believe that we now have a unique and possibly last opportunity to regain the trust and confidence of our target audience. Product innovation, tax incentives and value for money will still have their place but will not in themselves lead to the re-engagement. There is now a bigger need than ever before to reach out and connect with potential members through a customer intimate approach. The barriers are immense; the prospects of growing old are not attractive; retirement is not seen as a destination; and the language of pensions is complex and off putting.
Young employees are more concerned with saving for their first property, paying off their student debt or even just topping up their mobile telephones rather than contributing to a pension that may not pay out for years to come. Terms like equity can mean cash to young property owners (as in negative equity) and default funds mean “I don’t know what I am doing”.
The introduction of a new National System of Personal Accounts provides both the Government and concerned employers with a unique opportunity to turn this situation around. The foundation for results is based upon trust and relatedness.
Potential members need to know what the best solution is for them and that they are provided with all the support they need to achieve their retirement aims. It is very important that the seven million people in the United Kingdom, who are not saving enough for their retirement, are introduced to Personal Accounts in a new and enlightened fashion that adheres to these principles.
For all pension schemes to be successful going forward we need better financial education both in schools and the workplace. At the very least this should include the introduction of key life skills, such as an understanding of what is a bank account, mortgage and pension.
There is a huge opportunity to redefine the very language of pensions to one that can be easily understood, embracing new communication platforms such as My Space, Facebook and Twitter and also of creating a culture where retirement is not something to be forgotten but can be thought of as aspirational.
As pension professionals we all have our part to play and we need to start the process now.