By Dale Critchley, Policy Manager at Aviva
The first thing to consider is that the journey to retirement is neither linear, nor homogenous. The pension journey isn’t a set distance, over a set course. It’s difficult for anyone to pace themselves when they don’t know where the finishing line will be. There is always the risk of unexpectedly needing to change course any time, and onto what might be a more difficult route.
The Consumer Pension Journey paper sets out the key regulatory communication milestones. For example, when providers must send out retirement communications. However, unless an individual has planned for their retirement in detail or aligned their life plan with the scheme’s retirement age, providers could be ringing the bell for the last lap either too early or too late. Those rare occurrences where an athlete in a distance race sprints for the line, only to find there’s another lap to go, illustrates the consequence of a mistimed communication.
The key is to communicate effectively over the whole of a scheme member’s life. Continuous engagement, helping consumers to plan, take ownership and make effective decisions. The paper points out many of the barriers to achieving this position. Pension professionals who work in the industry have a head-start, and even we know how difficult it is to get all those pension saving decisions right, and the different skills and knowledge required. Expecting all consumers and workplace employees to train to become the pension equivalent of Katarina Johnson-Thompson is probably an unrealistic expectation.
Increased member engagement is an important goal, but they can’t be expected to do all the heavy lifting by themselves. A workplace pension is a team pursuit. Governance is vitally important to make sure that pension schemes are effectively run and provide a framework within which members can make their own decisions. Like the coxswain of an eight-person rowing team, trustees and provider committees are there to ensure that everyone involved in the pension scheme is pulling in the same direction.
We should also consider the role of individual professional advice in the consumer pension journey. It’s something that can be easily disregarded, especially by those who feel confident in their ability to manage their financial affairs. To help maximise outcomes, it should be recognised that even the world’s most talented athletes are helped by having a coach.
The paper also looks at the ‘structural’ barriers to achieving retirement goals. One of the biggest successes in improving pension provision has been automatic enrolment. However, automatic enrolment only works for the employed and works best for those who earn the most. This can disadvantage some socio-economic groups who are disproportionately employed in lower paid jobs. Also, women who work fewer hours to assume the lead share of caring responsibilities, as evidenced by the gender pay gap.
Anyone who has read the story of Helen Glover’s return to Olympic rowing over the past 12 months can’t fail to be impressed by how a parent to three children under three has been able to return to top class competition. Helen’s commitment has been amazing. She’s overcome set-backs to achieve her goals, while all the time balancing being a parent. As well as Helen’s personal drive and strength, what also struck me were the additional factors that played a part in helping to achieve her goal. The support of Helen’s partner, in sharing the child-care responsibilities, appeared to be key. As was the ability to work flexibly – training at times which allowed for a good work-life balance. And, lastly, the support from British Rowing who paired Helen with Polly Swan, who was also returning to rowing. Ultimately, helping both athletes achieve their goal. While not exactly a job-share, the analogy is an obvious one. There are some important lessons here for all employers and working parents.
It could be argued that the Tokyo Olympics is far more exciting than pensions. However, I think the pensions industry, individuals and employers can all learn some valuable lessons from these super humans when it comes to considering the consumer pension journey.
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