In this blog I talk about the failings of the financial services industry – the pensions industry in particular – to answer the questions people have. I look at this at three levels – at big data level – through the lens of a pensions dashboard, at the employer level, through the frustrations they can find getting data about their workplace pensions and at the personal level, getting the data we need to work out if we’re getting value for our money.
Big data talk
I was in conversation last night with Gavin Littlejohn, who’s well know in open finance circles as the Founder of the Financial Data and Technology Association. He’s created a global network of organisations participating in the open sharing of data in banking and he’s one of the drivers behind the FCA’s open finance initiative, about which I’ve written lots.
Gavin’s take on the pension dashboard is simple. It is not going well.
Rumours were confirmed that yet another senior figure involved in the delivery of the dashboard has been sacked. The scope of the dashboard is now reduced to pretty much finding pensions and even that limited ambition is not expected to deliver anything until 2022 and nothing substantial till at least 2025. My worst fears are being realised and there is not much that worthy souls like Chris Currie and Guy Opperman can do about it.
The public have simple questions ; they want to know who is managing their pension pots, what their pots are worth, how their savings have done and what their options are going forward.
Meanwhile the insurance industry seems to thing our questions are
- what will our pension pots be worth when the schemes mature
- what will they buy us in terms of an insurance annuity
- how much must I save to be alright
- where do I sign to pay more
Meanwhile in a basement room in Clerkenwell
While I had dinner with Gavin, I had lunch with Andy Angethangelou and a symposium of pension communicators and their clients keen to work out how to be more transparent.
My answer was simple, talk to people about what they want to talk about and give them facts. Do not talk to people about what you want to talk about and speculate.
The pensions dashboard is a case in point. people want answers to their questions not to be told what they should be thinking by the ABI.
Andy likes to show a chart which sees Financial services languishing at 58% on the Edelmann Trust Index and Technology prevailing at the other end of his scale with 78% of people trusting the data they get , generated by machines.
The lesson is pretty simple, the dashboard should be communicating facts delivered by technology, not marketing delivered by insurers.
Answering the question
On numerous occasions over the past nine months, I have seen individuals ,trustees, employers and even IGCs asking for data and being denied it. My favorite response was from one data controller who suggested that the client was asking the wrong question. The question that the individual should have been asking is how much more she should be paying , not what had happened to her money she started investing nearly 20 years ago.
Past performance may not be a guide to the future but it is a good guide to the past, and most of us want answers as to what has happened to our money and whether decisions taken on our behalf worked out.
I fear that people have been cowered into believing that knowing past performance is not only irrelevant but actually damaging to them.
Most shockingly of all, there is a school of thought amongst insurers running GPPs that the people who appointed them and pay the money to them (the sponsoring employers) are not entitled to know how the money they’ve collected and sent, has done.
Their questions are repulsed with statements that include
- It’s not your data – even though the data they are asking for is anonymised
- It’s not your business – even though the employer has set up a governance committee
It is within employer’s call to sack providers and appoint another provider to run its workplace pension.
It can justify doing so by telling impacted staff that the incumbent provider does not want to share the data which can enable it (the employer) to independently assess performance. In short it can tell its staff the insurer will not answer the question.
A simple lesson in communication
I had a conversation earlier this week with Ros Altmann and congratulated her on her idea for a birthday card which fell on the mat in a brightly coloured envelope and gave the recipient a birthday surprise, a meaningful simplified pension statement.
I expressed admiration for the idea but expressed scepticism that insurers would change their systems to issue statements to delight the customer rather than the scheme/plan renewal date. Ros sadly agreed, such a move was unlikely to happen.
Organising what we say to people around when they want to hear from us is not something that is in most pension communicator’s DNA, people get what we want to tell them when we want to tell it.
“Knowing what those questions are…”
The gap between what people want from a dashboard and what insurers want to tell them is wide. People want access to data and their money, insurers want more of their money and are prepared to sit on the data people ask for.
The simplified pension statement should include a statement in “pounds, shillings and pence” of how much has been charged them for managing their money. As Ruston Smith of Tesco says, “people – when they get a shopping bill itemising what they’ve bought, expect the cost of those items to appear at the bottom”.
Unbelievably, most simplified pension statements don’t contain this information and the Government is still having to consult on whether they should. The answer given by the pension industry to that consultation will be interesting. The consensus so far is that if we told people the cost of saving, they’d stop saving. I doubt people stop shopping at Tesco when they see their shopping bill, unless they can see they could buy the same items cheaper elsewhere. The dashboard has an answer for that too.
Value for money
The pensions industry has convinced itself, the regulators and the sponsors of the workplace pensions they manage, that it is too hard to give people an assessment of the value they’ve provided for the money invested and instead of answering that question, they’ve chosen to answer another question.
The question they have chosen is “do we think we have provided value for money?”. They have set up IGCs which are packed with experts and those IGCs have agreed with the providers (on every occasion but one – pace Virgin Money) that value for money has been given.
The bar for “value for money” has been set so low that everyone has jumped over it. That is because the question has been answered by the people setting the question!
When individuals were asked how they measured the value they got for their money, they replied that it should be measure on the outcome in their pension pot. (NMG 2017).
Once again the question people ask and the answer they get are quite different.
We will only get to a the answer to people’s legitimate question “how have I done” when we tell them how they have done. That doesn’t mean delivering a factsheet with gross and net performance figures but it means delivering the return that person got on their money and even more importantly, the return they got relative to the average return, so they can see if they have done well or badly.
That is their value for money figure and it happens to be their AgeWage score. Frankly until we start answering the questions people have with facts not speculation, with history not speculation and with total honesty, we aren’t being much help.