The customers for workplace pension schemes are the people who take the decisions. As Sam Seaton points out in her recent podcast for CAPData, decisions are taken on our pensions not by us but by our bosses.

The risk transfer from employer to member happened when employers walked away from responsibility for the outcomes and switched to a defined contribution system.

Troy is a reasonable man who came from JLT to NOW and now is at Cushon. Cushon is owned by WTW and NOW by Mercer, there is a symmetry to all this but I’m not sure that anyone could have guessed that NOW and Cushon would be playing a similar role for the two American owned consultancies.

Most workplace pensions will get over the line and find ways to keep going beyond the hurdles of 2030 and 2035, but there is a fall back for Cushon and NOW that they can integrate with larger master trusts under the same ownership.

Somewhere , within this merry dance of providers, administrators, investment managers and advisers are the purchasers – the employers who bought NOW and Cushon or into other master trusts consumed (or should I say “consolidated”) by another.

What of the “purchasers”, the customers if you are on the other side of the purchase? Leaving out views of the merits of the master trusts mentioned , their purchasers have had no say in what has happened and their staff (known as members) have no idea if they’ve had value for their pay deductions being held by mastertrusts chosen by others.

Most of us who are “members” (or policyholders if we got a personal pension) simply await access to our pot or maybe a pension if we think of pensions as a regular income paid till we die.

Troy, who is now MD of Cushon, has been on the operational side of mastertrusts since he arrived ten years ago and would have us change our view of what a master trust does. It should be  (my bold) – this from an article in Corporate Adviser

 

focusing on customers means recognising that value is about far more than cost. It is about delivering the best possible experience, communications, support, investment strategy and retirement outcome. As providers, I believe we achieve the best results for our customers when we put their needs first, rather than simply meeting institutional requirements.

But this is a very difficult thing for a master trust, its executive and trustees, let alone its owners, to properly know. I suspect that if you asked people what they understood by the state pension they’d describe a regular income that lasted as long as they and their spouse.

But what Cushon and NOW discover that the vast majority of the people who take benefits as members , do not take a pension, or an annuity or drawdown an income. They take a potful of money into their bank account. This isn’t the deal that staff of employers bought into when they passively allowed themselves to be enrolled. It is the obvious thing for people to do when they learn the money is available.

If you release water from a dam, it will make its way downhill following the most easy path the water can and this is what happens to “member” or “policyholder” money unless there are barriers put in the way.  Troy is clear about what the aim of a DC master trust should be

The success of any investment strategy should ultimately be measured not by political objectives or industry targets, but by whether it improves results for customers. Does it deliver better returns and retirement incomes?

Here we get into the nub of it. If the aim of providers (notice there is no mention of trustee’s here) is to deliver “better returns and retirement incomes“, then master trusts are going to need to explain to those Troy would like to call “customers” (who we call members) why DC maser trusts are best at doing this.

I don’t think they are. When it comes to paying a cash sum and then a pension, I think collective DC pensions do a better job than DC master trusts and I suspect that many employers, unions and  “members” think that to be true

So for them it must be for other things that DC master trusts are maintained.

As a 64 year old pension saver I have no objection to being considered a customer, if that suggests that I can exercise control over my money. But like most 64 year olds I am terrified by the nastiest problem in finance, turning pot to pension.

Is Troy going to offer me an alternative to cashing in my pot for an annuity, or setting up a drawdown, or is he going to allow me to draw my cash out and pay tax to sit in my bank account?

Is he going to offer from Cushon what sister company Lifesight pledges to offer when available – a retirement CDC pension?

As a customer , I want what I thought I bought when I let money be deducted from my payslips and bank accounts. I thought as a customer , I was buying a pension like it said on Troy’s first strapline!

Perhaps I will be able to get a pension from Cushon after all, will that be a customer option?