With workplace pension contributions increasing from tomorrow, I’m reminded of a recent industry event that I attended.
During the keynote, the speaker cut to a video where members of the public were stopped on the street and asked “who is your pension provider?”
Most of those questioned looked confused, unable to recall where their pensions were. Some were unsure if they even had a pension.
The reaction of the pension providers and experts in the audience? Laughter. The joke being their own customers’ confusion.
Surely the pensions industry should be on the customer’s side, helping them to succeed?
The reaction of the pension providers and experts in the audience? Laughter
Auto-enrolment has been a huge success, for which the government must be congratulated. The scheme has encouraged more than 10m employees to start saving for retirement, ensuring young people have a head-start in planning for their futures.
However, this success has come with a major unintended consequence.
When someone switches job, they’re given a new pension from a new provider. With the average person now having 11 jobs over the course of their career, it becomes very difficult for people to keep track of all these old pension pots.
Research carried out for Moneybox has shown the sheer scale of this confusion. Half of young people with old pension pots don’t know all their providers, and 60 per cent don’t know how to access them.
This lack of knowledge about our pensions, likely our biggest asset, can be traced right back to the pensions industry.
The more cynical out there may wonder if pension companies are reluctant to engage more with their customers in case the customers discover how much they’re paying, and how little they’re getting
Pension providers fail to engage with their customers and make the end-to-end process of saving for retirement confusing and difficult.
They send snail-mail letters written in financial jargon to addresses that are often out of date. In fact, 84 per cent of people surveyed said they don’t feel their pension provider keeps them well informed – a damning assessment of how the industry treats its customers.
I can’t think of another industry where customers know so little about what they are getting, and equally little about what they’re paying.
More than 87 per cent don’t know what their money is being invested in, and almost 89 per cent do not know what fees are being charged.
The more cynical out there may wonder if pension companies are reluctant to engage more with their customers in case the customers discover how much they’re paying, and how little they’re getting.
It's time to demand pensions which are designed for the way we live today.
I encourage people to consolidate all their old pension pots into one place. Choose a provider that makes this process simple, and uses technology to deliver a good service at low cost.
As a minimum, you should be able to check your account balance, see what you’re paying, and where your money’s invested, all from your smartphone.
Better still, you should be able to see how pension savings made today can increase your income at retirement.
Over the longer-term, I’d like to see the government put more power back in the hands of the people. Employees should have more choice over which provider receives their workplace pension contributions, based on the price and quality of service.
The Australian "superannuation" system is a great example of this – it has been well received by the public and has introduced some much-needed competition into an old-fashioned industry.
Why not mirror this in the UK?
Auto-enrolment has been a huge success and a great step forward for UK pension savers. However, only if we demand a better service from providers will we get the pensions we need to support our financial futures.