You are probably bored by my calling for more innovative use of Defined Benefit pensions to help savers exchange pots for pensions. This blog is not about that, it is about the tricky experience of becoming a pensioner after a career saving for a “wage for life”.
There is a heartening story from Jon Stapleton in this week’s Professional Pensions.
The headlines may focus on the savings in administration time, but I’d be interested to know more about the reductions in time and stress levels for those retiring from the British Telecom Pension Scheme. My father in law made that transition some years ago, I remember helping him with his forms and with his personal documentation. It was tough for him and it’s tough for people I know having to make decisions with life-long impacts.
- These decisions include whether and how to take a lump sum benefit.
- What to do with money purchase AVCs
- When to take benefits (with the concept of a normal retirement age an increasing misnomer).
In my experience, the administrative teams of defined benefit schemes are best placed to deal with these matters since they know the options and can share important information with regards taxation, conversion and commutation factors and can help individuals organise themselves well in advance of the event so that people’s first pension payment arrives on time and to expectation.
However, these teams must be careful not to offer advice. Is an early retirement factor generous or not? What about the commutation factors for tax free cash? What about the conversion factors if you have a DB scheme that takes in DC pension pots? For such inquiries there are supposed to be financial advisers who understand DB economics and can opine on what to do. I have found these advisers hard to find.
Understandably, in-house resources are constrained both by regulation and by their professional liability insurance.
So there is a demand for technology to step into the gap between a “self-service culture” and the traditional paternalistic role of pension managers and administrators who were there to advise members when needed.
It sounds that this is what Brightwell is offering and if it can do it for BT then I am sure they can do it for others. ProfPens tells us
Using the BTPS portal, members can now run retirement quotes to decide on their chosen option, confirm their choice, complete the application, verify their identity digitally and submit their application online.
This automatically sets up a settlement case, disinvests any additional voluntary contributions they may have, puts them into payment on their chosen pension start date, and converts them to pensioner status.
Brightwell said Onfido’s AI-powered technology verifies user identities using a range of document and biometric verifications, trusted data sources, and passive fraud signals.
Members report a high level of satisfaction and I hope that BTPS is using the savings it is making to redeploy staff to offering the personal help that is still needed sorting out the questions that are beyond the bots.
I was sorry not to attend their session at the PLSA where they and others talked about these matters and I hope that I will be able to talk with them about their service.
DB pensions have so much to offer people and too often decades of investment in building up the promise is dissipated through a poor member outcome at retirement. The reputation for being too complicated has been forged not in the saving for retirement but in the benefit claim.
If we want to restore confidence in pensions, we should, as Brightwell are doing ,focus on the “claim” and ensure that it is a comfortable and rewarding process.
Pensioners are not “liabilities”, they are the reason we have pension schemes and we should be celebrating their taking benefits as the fruit of a lifetime’s labour.
