As indicated in the picture above, pension providers treat inquiries about past performance as carcinogenic. They do not go out of the way to tell us the value we’ve got for our money.
I wonder how many people could answer the question, “how are my savings actually doing?” in a meaningful way?
How would you answer?
- Could you tell me the rate of return on your savings since you started making them?
- Could you tell me whether one of your pots was working harder for you than another?
- Even if you did , would you be able to explain why?
I think very few of us could answer those questions with any great certainty, we simply don’t get the management information we need to understand what has happened to our money.
So what do we get?
The first piece of information most of us get when asking for information is a warning that whatever we get is not going to be very useful
Past performance is no guide to the future.
This bit of wisdom is usually followed by exhortations to go talk with an expert, an IFA preferably.
Despite the Lloyds Banking Group advert telling us it is good to talk about money, there are very few people who you can talk to about your retirement savings, This is because the past is no guide to the future and any “retail” conversation runs the risk of your counter- party being deemed to be giving advice.
So what most people get when asking their provider how their pension is done is a series of numbers which they are told are no guide to the future and an instruction to talk these through with somebody who would rather not (other than for a substantial fee).
What we get
I decided to have a quick go at finding out how my NEST pension is doing – so googled
“How is my NEST pension doing?”
I did get an answer;
So I decided to press the link, discouragingly it took me to this page
Being interested in me, none of these navigation options looked very interesting so I tried again and did manage to get to this message
None the wiser – I had another go and finally – after several minutes, I found the information about how my fund was doing
Nest has 7.5m members, I wonder how many of them could work out that they are 99% invested in a fund illustrated by the NEST 2040 investment fund. Being one of the priviledged few, I pressed on
and finally honed in on what I was after
From this chart I could see that NEST had done rather well over all the periods they had chosen to illustrate performance.
- But what did this mean to me?
- Were these figures including the 0.3% performance charge?
- How could I work out how I was doing?
Sadly, I have no positive answers to any of these three questions. The chart seems to be telling me that I’m doing better than a benchmark of CPI +3% and from reading through the rubric in the previous screenshots, I could see that there wasn’t a lot of risk being taken, but was there anything in all this that related to me? Even though I am an expert, I found nothing on NEST’s website to answer the question “how am I doing?”
What we get – apart from the error messages – is too high up the ladder of abstraction to make any sense to the saver at all. It is as if NEST thinks that its 7.5m savers have a financial interpreter out there. We haven’t.
Another way of telling people how they’ve done.
I currently have on my desktop, 11 requests for information signed by AgeWage investors , keen for NEST to tell them how their NEST pension is doing.
If NEST are comfortable for AgeWage to receive the information that these 11 people have asked me to have, I will get from NEST the current value of their NEST pension and a contribution history telling me when NEST got money from the person, their employer and from the Government (which chips in with a tax-rebate).
From this data I will be able to tell that person three things
- How their pension pot has done (technically known as their internal rate of return)
- How it would have done – if invested in the average fund (As defined by AgeWage and Morningstar)
- How the two returns compare, based as a single number (known as the AgeWage score)
Advantages and disadvantages of this approach
I see the following advantages in this approach
- It tells people how they’ve done based on factual information
- It is easy to understand because it is simple
- It is the starting point to thinking about other things.
I see the following disadvantages
- It might show a low score which would make the saver sad or even angry
- Past performance being no guide – this number could be dangerous
- It requires the pension provider to do some work
Having been beavering away asking providers to give me the information , I am (unsurprisingly) getting a fair bit of pushback
- I am not an IFA – so for some insurers I can’t be acting as agent for the person I’m doing this work for.
- I have not got my data consent signed with a wet signature
- The pension provider is not currently providing this service to its members
Of course we are pushing back on these objections and will get the information in the end (and in digital format as required by DPA 17).
On the other hand, several large institutions, keen for us to analyse the data of the members and policyholders whose money they are managing, are being very forthcoming and supplying us with large amount of (anonymised) data.
The big questions for AgeWage are
- Can we win the hearts and minds of Government to sanction this approach
- Can we get pension providers and their fiduciaries using big data sets to find out if they’re giving value for money
- Can we get ordinary people interested enough in how their pension pot is doing to go on and ask other questions
- Where’s my money invested?
- Should I be doing anything now in preparation for the future?
I don’t know the answers to these questions, but in proving the AgeWage concept, I’ve got to feel that the answer to all three questions has to be “yes”.
How are our retirement savings actually doing?
Our research tells us that people are really interested in the value of their pension pot and would like to know how it has done since they started saving.
People currently asking this question of NEST (and most pension providers) get a lot of risk warnings and then a lot of information that isn’t very easy to digest.
AgeWage wants to simplify the answer to this question so people can see if they are getting value for money (whether the person asking is a fiduciary or the owner of the pot).
If you would like AgeWage to give you an AgeWage score, you can do so as part of our pilot. All you have to do is drop an email to firstname.lastname@example.org and I will get you a data consent form by return.
Thanks for reading this far, if you want to speak with me about this, I’d be happy to.