In recent blogs I have been responding to the FCA and TPR’s joint call for input on the standarisation of a pensions consumer journey. The journey is broken down into stages – the main stages of the pensions consumer journey are seen as:
- starting up a pension
- approaching retirement
- accessing a pension
So far we have been asked whether this is the right journey, what are the reasons for people to self-harm their retirement finances and what are the structural problems within society that stop people saving as they should. Today we are looking at what stops people from engaging with pensions .
I’m using the analogy of the river Thames which for many Londoners threatened them with the danger of flooding but is also London’s lifeline. We need to find a way to make the consumer journey as simple as getting down river to the sea. The barriers we place in the way of saving and spending our pensions are not physical (like the Thames barrier) but mental. We have made pensions fearful to many people. People fear they cannot save enough, they fear they cannot get their money back and they fear that the pensions system is not taking them where they want to go. We are not giving people a simple journey to follow but a world of worry and choice. That must change. But back to the call for action…
The paper asks;-
Are there other barriers to engagement that we have not identified? Are there solutions to the barriers to engagement that regulators, industry or others should consider?
The solution to the lack of engagement may not be to focus on failure. The concept of “Citizen’s Advice” is a very good one as it focusses on helping people understand what is happening to their entitlements rather than simply focussing on failure and the need for self-help. Much of the problem people have with seeking help is that they fear being told they have failed (this also explains why people don’t go to see doctors and dentists).
Encouraging people to engage with matters they feel they have lost control of is not a good strategy, encouraging people to make the most of what they have achieved is a better strategy and often results in remedial activity (like saving for a shortfall or reconsidering how to drawdown the pension pot).
The worry for instance about a Pension Wise appointment may well be that it will show up the inadequacy of someone’s pension wisdom. By comparison, a visit to a Citizen’s Advice Bureau, may upturn solutions to later life problems. The two approaches may be delivering similar messages but the success of Martin Lewis and others like him, is that they focus on people’s rights and provide guidance based on consumer advocacy. Citizen’s Advice has established a base of advocacy which is not being achieved by Pension Wise.
The paper mentions COVID and it’s useful to think about vaccination and how successful our vaccination program has been in dissuading people from avoiding the jab. This has involved advice to people to get jabbed.
The level of conviction in that advice is created by a strong sense that getting vaccinated is good not just for you but for those around you. This is the spirit of advice that can break down barriers with engagement and it cannot be achieved without strong policies, based on clear objectives with the option to opt-out but a clear default course of action into which people are opted in.
“Financial vaccination” is a phrase I am using in my blogs as an example of inclusive good behaviour encouraged by a firm understanding of what is right for most people. Compulsory vaccination would not achieve the same goal, nor does the kind of half-hearted approach adopted in other countries.
Can people within pensions break down the barriers?
Every time I hear a simple call for action at a pensions event, it is met with concern that it may be better to caveat the call. When we call for people to save , we are reminded that some may be better off paying off debt. When we call for people to consider their investments, we are reminded that past performance is no guide to the future. When we ask people how they want to spend their pension, we cannot tell them how their money comes back to them , instead we have a bewildering set of choices.
Not only are people constantly reminded of their failure to engage and save enough but they are intimidated by the complexity of options. I’m grateful to Lizzie Hartley for stumbling across the test site for MaPS relauch. I went to see how easy my retirement choices were to understand. This link takes you to the test site for “moneyhelper”.
The “pension pot options” are not a consumer journey but a junction at which there are a number of forks, each branching out into further forks meaning that everyone arrives at a different destination. It is like a river that turns into a delta.
I don’t think that most people want to find their way to a particular destination , they simply want to take the route most trodden and here we are at a loss to help.
In order to break down the barriers to engagement people are looking to those in pensions to provide them with leadership. Which is why I am spending so much time on this call for input.
I suspect that what standardisation is really getting at , is that it presents people with a way of getting from a to b simply without deviation or choice. This is the menu of choice that sits on the Moneyhelper test site
There is so much to think about and it is so hard to get your head around concepts such as “cash” and “income” when most people see them as the same thing. Indeed the more I look at that list, the more I despair that people will ever get to grips with all this choice.
We have taken the view that it is best to lack all conviction and that the alternative is a passionate intensity that amounts to pension zealotry.
But by giving up on simplicity and the straight from A to B solutions we used to have, we have rebuilt the barriers to people engaging with their pensions.
The pension consumer journey must be a river that flows to the sea , but it should – like the Thames, flow straight and true and not empty into the sea as one.
We need a simpler journey and a simpler way to explain it. That means pension people exercising leadership and acting with conviction. In the next blog I will explain what I mean, by looking at a way of building back people’s confidence in pensions by helping them understand what it is they’ve got and what it can do for them
While I think the FCA/TPR are right to ask these questions, another issue is who should they be asking. If people perceive barriers to pension saving, we should ask those people what the barriers are that they perceive. Who are those people and how do they plan to fund their years in retirement? For instance, how many of them had a windfall from a PPI payout and what did they do with it – did they even consider saving (some of) it as retirement saving? How do people decide between investing in property and saving and investing in financial products for their retirement? How does the need to pay off university loans affect their willingness and ability to even consider saving for retirement?
‘Consumers’ feature in the list of those who will be interested in the CFI, but in all honesty, how many are going to read this and respond? Certainly not enough to provide any statistically valuable evidence. (To be honest, I’d suggest that if people are not interested in saving for retirement, they certainly won’t be interested in reading the CFI.)
I suppose I’m just wondering, if we are worrying about people who do not engage with the retirement industry, then these are people the retirement industry never see and so perhaps can only speculate about. I hope the FCA/TPR are supporting this CFI with some robust consumer research as well – though they may be waiting to test some of the hypotheses the CFI throws up.
Thanks Henry, it appears that the moneyhelper site is fully available now http://www.moneyhelper.org.uk