Smart’s report is entitled

“Do DC members have their heads buried in the sand?”

conducted with Professional Pensions it concludes

If they are not in control of their retirement, they cannot address any looming income shortfall. This can lead to a spiral where members continue to ignore their pensions and repeat the negative cycle – often too late to have enough time to correct their course.

I don’t agree and I am not alone

Not sure I like that expression. Most DC members have day jobs, lives, families etc.

Retirement saving won’t often figure in their top ten list of urgent things to sort.

Hence the critical importance of automatic enrolment and good default options. https://t.co/OAN2Rm4lvq

— Mike Harrison (@HigherEdActuary) October 10, 2023

The root cause of the problem, according to the report is that

Many DC members are having trouble making sense of pension jargon, and figuring out the quality of life their pension will afford them in retirement.

47% of surveyed members say it’s difficult to understand the language of pensions, and 41% find it difficult to understand the quality of life they’ll have in retirement.

These challenges are particularly daunting for those who already feel they are not saving enough.

The solution to the problem is – according to Smart -in the palm of our hand.

But hand-held technology is too little adopted. I agree with all Smart’s conclusions at a micro level – but dispute the capacity of technology to put is control of our retirement.

I agree that we need better ways to put people in charge of their pensions. Putting them in touch with their own savings experience – giving them real-time information about how their investments  are doing is something that schemes could and should be doing more of.

Helping people understand how far they have got towards achieving their goals is a challenge pension schemes should be taking on. And I’d agree with Smart’s conclusion that using a technology platform that delivers these items is something that DC schemes could be doing now.

Ironically, not only do members demand modern technology, it can reduce costs for pension schemes too.

These savings can be redirected to activities which could boost member returns, like more sophisticated investments. Additionally, modern technology can deliver greater member engagement, reduce costs through removal of errors and risk and ensure greater data security.

Crucially, the benefits of cloud technology will only grow in urgency and scale as time progresses. Schemes should not wait around for regulation or the pensions dashboard to be the instigator of change.

Savings yes – pensions maybe

But the way we organise our later life finances is – like much else in life – accidental not planned.

• For most of us, state pensions (not workplace savings) will be our chief source of retirement income.
• House ownership unlocks income for millions with recourse to equity release
• DB pensions are a third source of “accidental” income in retirement.

My point is that we accrue state pension by paying national insurance, not something that anyone (but the self-employed) does deliberately.

We own houses because we do not want to rent, not to improve retirement income, equity release is an accidental benefit of successful home ownership.

DB pensions are generally done to us, most of us teach, police, judge and look after the sick for the sake of the job, not for the pension.

So the vast majority of pension wealth is created accidentally and the income arising is paid to us with relatively little engagement . Where we can significantly improve income (through unlocking equity in our property) we need to be opportunistic.

Planned savings are still relatively unimportant to us as a nation.

Having a “savings plan” is something I’ve been brought up on. I have made many plans and broken most of them. Every boxer has a plan till someone hits you in the face – I misquote Mike Tyson.

The problem with plans is that they are seldom flexible enough to meet with the uncertainties of life – being laid off – having serious ill health – divorce and other financial catastrophes – happen.

So as a nation, we put our trust in things happening to us – which are broadly beneficial and put our heads in the sand as we go along.

The problem happens when the things we expect to be done for us – such as DB pension accrual – stop happening and we find that we are now being expected to take huge decisions about our finances that we do not feel we are in a position to take. We are accidental savers who are being asked to be deliberate in how we shape our financial futures. It is as Mike Harrison says.

Smart tech helps – but only so far

Smart are undoubtedly the leaders in the development of technology in the workplace space (Pension Bee can probably grab that title for personal retirement savings. This report shows that workplace pensions are missing a trick when it comes to technology

Younger audiences show a particularly high understanding and use of apps. However, contrary to stereotypes, this enthusiasm spreads across all surveyed age groups, with almost 1 in 3 respondents over the age of 50 also preferring to access information about their pension via an app.

But we must not confuse the app that tells us about our savings , with the reality of our later lives. Our later lives are shaped by family, health and financially – by decisions we never took the results of which are beyond our control. They are certainly not items that appear on a pension app!

To suppose that our financial fortunes can be managed in the palm of our hand is a stretch. Smart would be better to tone down the headline and focus on the marginal gains we can make to our personal VFM , by being better with the money that accidentally comes our way.

Those who do not have access to – or choose not to use – technology to manage their savings aren’t burying their heads in the sand, but they be missing a trick!