Last year, I wrote a blog that probably hindered my chances of ever working at the Bank of England by openly mocking their Chief Economist for “not being able to make the remotest sense of pensions”.
Mr Haldane’s confession was timely though as the ABI, with the support of industry, Government, regulators and consumer groups, had just produced Making Retirement Choices Clear – the cross sector initiative with the dual aim of helping customers better understand their options at retirement and removing jargon from the sector’s vocabulary.
Six months on from the launch, pension providers and supporters of the initiative have already made vast improvements to the way the sector communicates itself and its products to customers. To give you an idea of the changes providers have already implemented, here are a few of examples:
- Thousands of system-generated documents such as wake-up packs have been re-written. One provider alone has already amended 800 individual documents.
- Providers have enlisted the help of the Plain English Campaign to simplify all customer communications.
- Call scripts have been carefully revised to include the new language advocated by the guide.
- Frontline staff are being re-trained to deliver a better customer experience, using language that is proven to be understood by research.
- Handy digital tools, calculators and other engaging forms of content have been designed to help customers navigate their way through the decision making process.
The Money Advice Service and the Pensions Regulator have also revised their communications in line with initiative, in important material like the MAS Your Pension: it’s time to choose guide and TPR’s online trustee toolkit.
In addition to revising the language and terms used, providers are also updating the way the information is presented to customers across all channels and helpful explanation videos are now the mainstay on many provider’s websites.
The next six months will see providers spending more time and money revising letters, call scripts and website content in time for the March 2018 deadline, but there is more to do to improve consumer engagement in pensions; the language we use is merely the start.
From a policy perspective, the ABI is looking at the timing of customer communications, given the blurring between ‘work’ and ‘retirement’ and the subsequent obsolete notion of a ‘nominated retirement age’; that number that you pluck out of thin air when you’re in your twenties and are asked when you would like to retire.
At present, rules dictate that customers must receive their retirement pack six months before their selected retirement date. However, research by the Pensions Policy Institute (PPI) suggests that there may be an unintended consequence of the arrival of a scheduled retirement pack that may prompt individuals to access their pension pot - most commonly by withdrawing cash.
Engaging a customer too early could also increase the risk of opting out of pension saving. Engaging them too late could increase the risk of consumers feeling under pressure to make a decision without fully understanding the consequences.
Similarly, the format of communications needs to be personal to be effective, depending on a customer’s age, gender, financial capability, financial confidence, and income levels. But according to the PPI research, communications will only be effective if we harness what it refers to as ‘teachable moments’ such as “key transitions, like moving house, getting a job or starting a family”. Interventions at these life events can help trigger action and focus the mind on taking simple, practical actions at the appropriate moment in time, especially when coupled with financial advice or guidance.
With the sector now halfway through implementing Making Retirement Choices Clear, the Government and FCA both have a role to play in enabling providers to further improve consumer engagement, by updating the rules around annual statements to make them simpler and more personalised, and by reviewing the timing of retirement packs.
Mr Haldane, aged 50 and now just five years away from being able to flexibly access any DC pots that he may have, is arguably at his own ‘teachable moment’.
Fortunately for him the changes brought about by Making Retirement Choices Clear will be fully embedded by then. But will the shortcomings of the retirement process mean he makes he makes an un-informed decision about how he finances his retirement?
We shall see.