Hello, it’s a real pleasure to be here. I attended this event last year and it has again been a very thought provoking day so far with a great gathering of people.
In the next ten minutes or so, I’ll share my reflections on trust in the long-term savings sector, and particularly where I believe we can individually and collectively make the biggest difference.
As you might imagine, the reputation of and trust in the sector is something that we discuss and grapple with quite a lot at the ABI. And as Janette Weir’s great piece of research[1] with the over-50s shows, it is a big issue but it is also very nuanced and there are no silver bullets.
But it is an issue that demands urgency: it is a wake-up call that trust in long term savings providers is lower than trust in banks - given their role in the financial crisis. And it would be a dereliction of our duty not to do our utmost collectively to change this, given just how important long term savings are to give people dignity in retirement.
As Janette has also shown, when people think about pensions, there are many strands:
Firstly, the system of three pillars of pension provision. The differences between the state pension, employer pensions and additional private pensions, and the subcategories within, may be well understood in this room but for people outside, bad headlines in one area affect the whole. And it is confusing that it’s all called “pension”.
The sheer number of alarming headlines, be it on State Pension Age changes, BHS, or British Steel, amounts to a drip-drip effect in people’s minds that affects the reputation of the sector as a whole. Adding to that the well-known scandals of yesteryear – Robert Maxwell, Equitable Life - and it isn’t surprising the sector has significant challenges in rebuilding its reputation.
But some of our historical issues are also structural. Janette’s research points out that trust is a function of engagement.
Yet the history of pensions in the UK is not one of engagement. It is one of lack of individual ownership – the pension paradigm for many years was a final salary pension, promised by a benevolent employer, with trustees making all the decisions for people, without any need for the individual to get involved. This blissful paradigm will be especially present in the minds of the over-50s you interviewed given final salary schemes are rapidly disappearing, except in the public sector.
And the history of private pension provision is also one of intermediation – where providers’ main focus was on their relationship with the adviser, rather than the customer.
As a result, making communications really easy and straightforward for customers to understand is not something that the sector has historically had to focus on.
So our starting point as an industry to engage people is not brilliant.
It’s easy to be gloomy about this backdrop but I’d like to offer a more optimistic assessment.
Firstly, the enormous opportunity offered to redeem ourselves through automatic enrolment. With over nine million people auto-enrolled into a workplace pension, we are well on our way to normalising workplace pensions again. Whilst it is an inertia policy, this is a huge opportunity if we manage, over time, to communicate with people in better, simpler ways, and to draw them in to engaging more.
Secondly, the promise of technology to simplify things. As many of you know, the ABI, together with 16 contributors and the PLSA, many in this room, was instrumental in delivering a pensions dashboard prototype to Government last spring which has led to a commitment from DWP in October to deliver this service.
It is not lost on DWP officials that, once you automatically enrol millions of people into workplace pensions and they collect new pensions whenever they switch jobs, we all collectively owe them a duty of care to make sure they know where their money is, and they can use it in retirement. The current situation where £400 million, or by some estimates, £3billion of pension money is lost to people, has to end.
And needless to say there’s much more by way of technology than that project – intuitive savings apps are coming onto the market all the time, robo-advice is on the march, and all this will help people engage with savings and pensions in new and better ways.
Thirdly, the great opportunity offered by the establishment of a single financial guidance body. This is likely to bundle financial capability work, debt advice, and guidance on other financial services, including the excellent helpline of the Pensions Advisory Service, into one organisation that can really support people with their finances in a streamlined way. It also offers us in the sector a great opportunity to get involved and support the new body’s work.
This backdrop offers us opportunities to take matters in our own hands, both individually and collectively.
There is a great quote in the research from Ignition House: “Think less about trust but about being trustworthy and how to give people simple evidence that you are trustworthy.”
First and foremost, it is up to individual brands to step up. It’s brands’ individual correspondence that drops through the letterboxes, it’s brands’ individual websites that people use. And there is progress - annual statements are already better than in the past. There is innovative thinking – I have seen experimental annual benefit statements in video format. A great idea, given just how much people turn to Youtube for all manner of things, rather than reading old school instruction booklets.
There is also an open invitation from the FCA to providers to come up with new ideas for communication and disclosure.
Then there is collective action, through coming together in trade bodies and other coalitions for concrete action on the ground. The dashboard prototype was a great example of that.
In a similar vein, our Making Retirement Choices Clear Guide was a sector-wide coalition, with a Steering Group including the Association of Professional Financial Advisers (as was), the Personal Finance Society, Citizens Advice, the PLSA, MAS and the Pensions Advisory Service. This sought to simplify the terms of the new retirement market, removing the jargon of drawdown and annuity and replacing it with terms people can actually understand, like “guaranteed income for life”. We’re half-way through the roll-out and providers have made good progress in integrating the terms into their literature.
And at the end of last year, we published our Guide to identifying and supporting vulnerable customers, aimed at sharing best practice examples. Members committed to put in place a vulnerability strategy and policy, train their staff to implement it, and continue to share best practice through the ABI.
The guide includes some powerful examples of providers doing precisely what the research say people want – providers having their back, treating them as individuals, helping them in their specific situation, going the extra mile.
The more we embed this, the more we will have a positive drip-drip effect to increase trust.
Beyond how we treat our customers, we can also seek to bring about changes in policy to increase engagement and trust. We support making guidance at retirement the norm, so that more people take advantage of the great service of PensionWise to think carefully about their retirement decisions. We also would like to see a specific nudge to people much earlier to start the process of thinking about retirement choices, in the form of a mid-life MOT at age 50.
And we want to come up with new ideas to support self-employed people into pension savings given this group is not benefiting from auto-enrolment and many are under-saving. We are working with HMT and DWP on a TechSprint for self-employed people on 26 and 27 March to explore new ideas and technology solutions.
Finally, we need to see institutional change. Perhaps one of the most striking factors of our pension environment is the lack of a long-term, joined up strategy across Government. In New Zealand, the independent Retirement Commissioner provides regular reports to the Government on its retirement income policies. Such arm’s length advice, perhaps provided by a new Office for Intergenerational Responsibility, would be extremely valuable in the UK so that the implications of the ageing society are assessed holistically, rather than by individual departments.
So there is a huge amount for us collectively to do, what we need to do is roll our sleeves up and to get stuck in. And as we progress this, given today is the 100th anniversary of the Representation of the People Act, we should adopt the suffragettes’ battlecry: “Deeds not words!”