TPR and FCA’s call for input on the pensions consumer journey goes a little off road in it’s eighth section when it moves on to product decision making and specifically the choices employers make about the workplace pensions for their staff
The CIF asks what guidance and support do employers need when picking a workplace pension for their employees and is more required?
A small number of large employers got very good support when choosing workplace pensions and this resulted in millions of employees being in good schemes.
But the vast majority of employers made decisions on the basis of what was good for the employer not the staff. Generally this worked out fine as the large commercial master trusts and insurers found ways to integrate with payroll meaning that employers got good schemes at a low initial and ongoing cost to them.
But as the value of people’s pots grow, employers are coming under pressure to explain to staff why they made the choice they did and they cannot rely on phrases like “the quality of the payroll interface” and “AE compliance support”.
Employers need to evaluate the decisions they have taken with the help of data . Most medium to large schemes have at least 5 years AE data and next year some will have 10 year track records. A system must be developed that allows employers to establish whether the outcomes of the pension saving into these workplace pensions is good or bad. This means comparing achieved performance for staff pension pots with an appropriate benchmark and having some means of evaluating that comparison.
This is being addressed at present by DWP TPR and the FCA and it needs to be supported by the efforts of IGCs and Trustee boards who are spending too much time evaluating VFM in terms of top-down scheme evaluation and too little time thinking about what is being delivered from the bottom up. There needs to be an obligation placed on any pension provider, enforced by the fiduciaries, that the value being given by a workplace pension is shared in a transparent and intelligible way with an employer. This is simply not happening at the present and that means that most employers are in no position to explain to stakeholders why they are using the workplace pension they are in (other than it seemed like a good idea at staging).
This is of particular importance when it comes to talking to the key stakeholder- the staff. which leads to a second question relating to employers
How can employers promote Money Helper (MaPS)?
What help do employers and firms need to be able to give appropriate support to members and how can we encourage employers to share appropriate Money Helper guidance?
Whether employers like it or not, employees will see a workplace pensions as something offered by the employer. To some extent employers can profit from satisfaction with a workplace pension and there is risk if things go wrong.
But employers are not encouraged by either providers , fiduciaries or regulators to report on the progress of workplace pensions and therefore they don’t.
We are now asking employers to support members and share appropriate Money Helper guidance. But employees aren’t likely to do what their employer tells them without some reassurance that the employer is looking after their interests where the employer has some control. The employer has a critical role to play in engaging with staff on pension issues but cannot simply be treated as part of Pension Wise’s supply chain.
This means finding ways to ensure that the employer is itself engaged with pensions and that leads back to providing employers with meaningful management information about the progress of the workplace pension (see above).
The alternative is that Pension Wise’s promotion may be zero or limited to the placement of a leaflet on a staff well-being noticeboard.
There are ways of reporting on workplace pensions which are emerging out of work between the pensions industry and DWP, FCA and TPR and it is important that we find ways of sharing this reporting with staff. This is the pre-requisite of an employer’s promotion of Money Helper (MaPS).