I’d like to draw your attention to an important study from Willis Towers Watson’s Thinking Ahead Insitute.
The study asks questions of pension providers around the world. It comes to one conclusion on their role which I think informs the document as a whole
Governance is still key
With regards to the effectiveness of the system as a whole, there are large gaps. There is insufficient focus on the needs of the plan participant, and entrenched resistance to change
At AgeWage we study these documents carefully; WTW share this stuff freely for which we’re very grateful.
We can sit down and think about the big issues and see how they translate into the things we are trying to do to make things better.
Here’s a collaboration I’ve been working on with my friend and AgeWage advisor, John Quinlivan. The text in black is our takeaway and I’ve left in the red comments – which are challenges we think we can help with.
I hope the people at WTW see how important this work is , and how it helps young firms like ours to evolve our mission, route to market and our product.
Here are our 14 takeaways
- Pension adequacy is a significant failure of the system. MORE MONEY NEEDS TO GO IN which makes getting Value For “Money saved” even more important
- There are issues of industry structure and continuity/commitment in the face of structural change. Disruption needs to come from above and below
- There is weak commitment and low resilience from plan sponsors. SO MORE EFFECTIVE GOVERNANCE IS NEEDED FROM FIDUCIARIES
- The role of established players may diminish as an evolving industry structure emerges in which specialist pension delivery platform organisations play a greater role. Technology powers self-provision – see PensionBee , Penfold and others
- Post-retirement income arrangements are primitive. Better design requirements include choice architecture, and the development of a market for longevity tail insurance. NEEDS CDC INNOVATION , but also support on pathways.
- There are wider issues to address around engagement and sustainability. ESG ISSUES amongst other things need to be factored in.
- Regulation can play a more positive role. THE FCA SANDBOX developments should be beneficial to start-ups like ours.
- Global themes can be discerned across different markets. Despite the differences each market faces similar challenges. SOLUTIONS CAN BE EXPORTED / IMPORTED
- Redefining the role of the employer Traditionally, employers played a central role in the DC system. More recently, platforms have emerged that offer an alternative to single-employer plans and re-define the role of the employer. NEED TO RE-ENGAGE WITH EMPLOYER WITHOUT ADDING LIABILITY. AgeWage can help here.
- There are wider issues to address around engagement and sustainability These are more than ancillary issues.
- Scale matters .Staying competitive in the face of regulatory and administrative challenges and keeping up with technological change is expensive. The costs of doing so may squeeze out small players. A B2B MODEL HELPS DRIVE SCALE.
- The accumulation phase is just the beginning. It is now widely recognised that the focus on accumulation alone is too narrow, and that greater attention needs to be paid to the goal of providing lifetime income. THIS IS PROBABLY TOO EARLY FOR START UPS….but some of the data output might help fill in some of the gaps.
- There can be a bigger role for the state as a constructive partner in creating the conditions for future pensions adequacy. PENSIONS DASHBOARD AND CDC
- Regulation can play a more positive role. The ability of industry participants to build better solutions can be hindered or enhanced by the actions of regulators.
You may think it odd to share the results of collaboration in this very unrefined way, but I think it’s right to acknowledge how industry collaboration can go on, in the most unexpected ways.