15 of Britain’s largest workplace pension providers are joining forces through their trade bodies to deliver what they describe as a thunderclap effect this autumn.
To most people , a pension is something that pays them an income when they stop working. The bulk of that income will be paid by the state and, if they are lucky by a company pension scheme, those less fortunate can get a top up pension through pension credits or through the various guises of universal credit.
Although this is what matters to most people, the thunderclap will be about the savings people make voluntarily into workplace pensions or occasionally into pension savings plans they set up for themselves.
To “engage” people with what’s coming to them in later life, the thunderclap needs to talk to both saving through payroll/savings and to their entitlements from the state. It is interesting to see how effective the thunderclap will be if all it promotes is awareness of money saved into retirement savings plans. We learn that..
Over 30 million pension savers are being targeted in a new cross-industry campaign designed to boost people’s understanding of and engagement with their pensions, with 15 pension providers and schemes already signed up.
The thunderclap will see the two trade bodies of the providers of retirement savings taking the lead. the Association of British Insurers (ABI) and the Pensions and Lifetime Savings Association (PLSA) will have £1m to spend, which is going to need to be spent well if it is to provide a thunderclap.
The campaign looks like an extension of Pension Awareness Day, the Pension Geeks’ high profile campaign, that is now run by Aegon. Pension Awareness Day is typically in September, this year September 15th.
As it grows, savers will be able to see the campaign in a variety of formats and places, including social media and in digital and written communications from their pension schemes. This does not sound very exciting, it does not sound like a thunderclap.
These communications will share tips on how to identify who pension providers are, make sure contact details are up-to-date and check how much members have saved towards retirement, and will also help people prepare for pension dashboards.
The pension dashboards may be available to the 30m savers some time in 2024 but all savers are likely to see in 2022, is news that they have been further delayed. It is not savers who need to be prepared for pension dashboards but the providers of the feeds to the pension dashboard infrastructure which is still under construction. The thunderclap is coming from way over the horizon.
It is designed to help savers understand the basics of pensions, after research suggested that only 20 per cent of people are confident they are saving enough for retirement, raising concerns that “millions” of people are at risk of adequacy concerns if action is not taken.
For most people, the basics of pensions are that a weekly or monthly payment is made into a bank account (cash payments are nearly a thing of the past) and that those payments continue for as long as someone is alive. That is why most people differentiate between the pensions that get paid for ever and retirement savings, which amount to a capital reservoir known as a “pot”. It is important that we do not confuse the two, this is about pots and not pensions.
Around 15 providers and schemes, representing 41.5 million savers and customers, have already committed to supporting the campaign, with a collective investment of at least £1m for the organisation over the next three years, and a multiple of this amount in scheme and provider specific resources to further amplify the campaign.
Here we find the allocations of capital getting murky. The £1m , representing a modest £67k per provider, is going to be eked out over three years , representing a commitment of little more than £20,000 per year, that’s the cost of two tables at an award ceremony.
It is thought to be the first time that so many pension providers and schemes across the UK have united behind the same call to action, with the concerted action expected to reach 10s of millions of savers across a variety of pension vehicles as a result.
Seldom has so much puff accompanied so little resource, I wish the ABI and PLSA well in spending their £300k budget, but I suspect the 41.5 million customers of the “Thunderclap fifteen” and the the 30m of them that are saving are unlikely to be clapping very hard.
There is clearly a political dimension to this rather underwhelming thunderclap. It is to recognise the work of the Department for Work and Pensions (DWP) in creating an “engagement season”. This looks like a new version of the much maligned statement season, with the DWP making available free resources for use by all those who wish to participate, including employers, regulators, and government departments.
Commenting on the launch of the campaign, Pensions Minister, Guy Opperman, stated:
“Engagement season will complement the crucial work already underway on pensions dashboards and simpler statements, helping savers get to grips with their pensions and bringing retirement saving into everyday conversation.”
Retirement savings or pensions?
Retirement saving is one of the most boring topics of everyday conversation I can imagine. Will pension awareness day morph into “retirement savings engagement season”? I hope not, pensions aren’t boring, they are our escape route from work. Retirement Savings are a thunderclap headache until they become a pension.
As the ABI’s Yvonne Braun , 70% of people do find pensions hard to understand, especially”when they have “retirement savings conversations”. The thunderclap complexity of pensions is not in the saving but in the choices people are given when they want to buy a pension.
Is the pension dashboard to be renamed “the retirement savings dashboard”? And what exactly do we need to do to “prepare for pension dashboards”?
At the moment, people are confused by the seemingly random interchange between pensions and savings. People are not at all confused by auto-enrolment, they see it as a pension tax which is for own good which they opt-out of at their peril. Almost everyone knows that they will never save enough to provide themselves with a guaranteed pension that replaces their pre-retirement income and most people are aware that pension savings provide no guarantee of the income they will get in later life. This is confusing, but it is known.
The DWP pay pensions and they pay pension credit. They are creating policy to recreate pension schemes through CDC and they oversee auto-enrolment which has created tens of millions of retirement savings pots. The DWP’s messaging has got to be that these tens of millions of retirement savings pots can and will become part of their pension. Then people will engage with retirement saving as something more than picking up some free money from employer and HMRC, right now – they are properly confused.
Until the DWP, ABI ,PLSA and the providers , come up with ways to end this fundamental confusion, no amount of urging people to get themselves ready, will create engagement. People need pensions and not pots and until providers come up with something better than an annuity, they won’t get a clap – let alone a thunderclap.