If I want to buy a new washing machine I know where to start. I go to John Lewis, or I look on Kelco or I buy a Which magazine report. I do not need a washing machine adviser, nor to read a lesson from Washing Machine Conduct Authority. I can open the door, look at the tub, check reliability experience and see whether it fits in the hole between the wall and dishwasher. I can make a purchase in confidence and look forward to deliver, job done.
This is not the case with pensions. Despite several attempts to standardise the way we purchase pensions, most of us have seldom found the signing on the dotted line a satisfactory experience and few of us have any engagement with our accumulating savings, beyond a line on our bank statement or an entry on our payslip.
The best thing that’s happened to pensions in years , is that nowadays, we join a pension savings scheme without even knowing it.
Which is the point being made by Share Action in a report they published last week. You can read the report here. Or you can just watch this video – which is pretty good
What Share Action are saying is that people save more when they are engaged with what they are saving into.
This is a pretty basic rule of marketing, get people to engage with the product they’re buying and they will not only buy better, they will buy more often.
Translate this into “savings speak” , if you want to get people to increase contributions, you’ve got to get them to pay attention to their pension.
I think that there are three things that a pension can be judged on
- What it provides at the end of the day
- What you’ve paid to manage the money
- How well the pension provider has engaged you on the way.
Share Action are thinking about #3 and it’s one of the three things that goes into my rating of “value for money”
Now you might be saying, it can’t be that hard to get data on what a pension provider has achieved – or what you paid in costs and charges but you’d be surprised. That data isn’t generally available and it’s not likely to be generally available to us punters for some time.
Nor it it going to be easy to compare the member engagement scores for all the pension providers. That’s because the providers don’t like their research to be “benchmarked”. Each year, lots of pension providers get together and jointly commission research into what they think makes for good “member engagement”. Each year they share the information with each other but not with the public!
They do this using their “independent” governance committees, who have become market research units. These “IGCs” aren’t particularly independent, because they depend on the providers for their existence, they are paid by their providers and their providers determine what they say and do – at least in some cases!
Providers do not want us to benchmark them as we do washing machines. Instead, they’d like us to judge them on their terms. Which is why we can’t get the information we want to get independently of their IGCs or in the case of master trusts, their trustees.
I sat in a meeting yesterday with some posh consultants who have good ideas about value for money. The trouble is, they are in the pay of the people who they would like to assess. They are conflicted.
Infact most consultants are now hopelessly conflicted, they are not just working for the providers they should be advising on, but they are providers themselves – hopeless!
Finding a truly independent source of information is becoming increasingly difficult. Which is why having organisations like Share Action and Pension PlayPen which generally don’t have any skin in the game is so important.
I believe that people should be able to compare pensions on performance, costs and engagement and I’m going to set up a system that will allow you to compare you SJP SIPP with NEST and your Allied Dunbar s226 with People’s Pension! You might say that’s a bit fanciful , but it’s no more odd than comparing your Hotpoints and your Zanussis!
People love shopping!
People love buying things, making purchasing decisions – except that is – until it comes to financial services. Then it all gets too hard.
People love selling things too – houses, boats – washing machines – the world is full of traded items, but not pensions. Most of the pensions we buy sit on the shelf and gather dust, because we don’t know what to do with them.
This is a bad state of affairs, the consumer has no way to shop for or trade pensions, the consumer has no information and no exchange, the consumer is denied these things by a strong sell-side and because they have been made weak buyers!
All this can change and will change. We are at a unique point where technology is driving change and where Government is demanding change. The big consultancies are generally conflicted and the governance committees and trustees are hopelessly compromised.
It’s time for a new broom to sweep away all the dust and allow us to see what we’ve purchased in a new light. When we can see what we’ve bought and compare it with what we could be using, then we can start organising our pension affairs better.
I hope to bring good news on all this – watch this space!