Pensions Minister Guy Opperman is determined to increase saver engagement and create an environment where pensions are being talked about in the pub. A key initiative to enable this is a ‘statement season’ that would require every provider running an auto enrolment DC scheme to send savers a benefit statement at the same time every year.
The House of Commons Work and Pensions Committee took a different view on the 12th of January, stating, “We are not convinced that the gains from a statement season will justify the complexity of introducing it.
In our view, the measure is at best a stopgap until pension dashboards are available.” There are significant hurdles to overcome to ensure a statement season is viable.
Pension firms know that any member communication results in an immediate flurry of member queries. Sending out every statement across all arrangements within a short window would create a huge spike in seasonal workload and is more likely to result in disappointment and annoyance with the service provider, rather than any positive engagement with the pensions process.
The minister is focused on paper statements. But this goes against the direction of travel with the vast majority of the country going online to shop, book a taxi or buy airline tickets. You are far more likely to read an email and then click on a link to a pension service provider’s website, than access your pension after receiving a piece of paper in the post.
This approach flies in the face of COP26 and the gains we have seen in environment protection and reducing the felling of trees. The question is, why are we sending savers multiple benefit statements, when the pensions dashboard is being built, supposedly giving a consolidated view across all your pension arrangements – defined benefit and defined contribution.
Once built, savers will have key information on a web page, with links to individual pension service providers’ contact details and/or websites. Given that these are already in train, would it not be sensible to focus all our energy on this important initiative? The pension dashboard has issues of its own.
The infrastructure means the dashboard will send every saver’s request to every single pension administrator in the country, querying whether they hold pensions data for the querent.
This has necessitated a layer of Integrated Service Providers (ISPs) who will triage these queries and either respond on behalf of the administrator or pass through relevant queries. This will create complexity in itself and unknown cost for pension administrators.
The pension dashboard team is also determined to launch with both ‘find’ and ‘view’ functionality, which means that a saver will not merely be able to view every pension arrangement (under a thousand members) he or she is a member of, but receive a recent value associated with every defined benefit or defined contribution pension.
Unfortunately, experience tells us that delivering such an enormously complex infrastructure is – whether public or private sector – fraught with difficulties. Merely being able to log on and view every pension one has in one place is itself a huge challenge and benefit. Adding DC values should be possible and would be a welcome next step.
One could argue adding the ability to update the saver’s address on the dashboard and having it sent to all pension administration providers – as is done in the Netherlands – is likely to be an enormously welcome functionality. Enabling the ability to view defined benefit pension values is probably at the bottom of this list and the most difficult, in terms of feasibility.
Rather than focusing on statement season, taking this longer view of delivering the dashboard is likely to result in a quick win. One could then build on it, rolling out additional functionality, including multiple dashboards, modelling tools, educational content and the ability to consolidate pensions quickly and conveniently, potentially solving the small pots issue. Statement season and the dashboard will be very useful for individuals with meaningful retirement savings. However, the majority of savers who are being targeted by the Pensions Minister do not meet that threshold.
To make a real difference, let us hold the long view and for the sake of savers, implement adequate contribution rates to give them something worth talking about in the pub.
