How to help members achieve better outcomes at-retirement
The session was hosted by Jonathan Watts-Lay, director, WEALTH at work and included other key industry professionals including Lesley Sutherland, group pensions manager at Experian, Gareth Tancred, chief executive at The Pensions Management Institute and Kevin O'Boyle, chief executive at Kevin O'Boyle Consulting.
Here is a summary of the main themes discussed and comments from speakers.
Risks at-retirement
“A lot has changed since 2015 when freedom and choice came in. We seem to have on one hand consumers who constantly tell us in research that they really like the flexibilities of freedom and choice. But on the other hand, we also see the scare stories. For example, scams get a lot of publicity – about £1 billion was lost to scams last year. We also see things like inappropriate products being sold to individuals at the point of retirement – probably most vividly seen with the British Steel scandal.” Jonathan Watts-Lay
“Whilst freedom and choice has brought many exciting opportunities and the ability for people to take greater control of their retirement and their future. It's also brought a lot more risks and a lot more challenges, particularly for Trustees when they're considering members reaching this vital point of their career and wanting to access their retirement savings.” Gareth Tancred
“Large numbers of people are cashing out. People cashing out of defined contribution (DC) schemes at the moment may be doing it for the right reasons or the wrong reasons, but they're almost certainly probably paying too much tax in many cases.” Kevin O'Boyle
The gaps at-retirement
“Are employees and members of various schemes being given the opportunity to understand their choices at-retirement? Often not, and Trustees and sponsors are burying their head in the sand and not doing anything about it.” Kevin O'Boyle
“Very often we still expect members to make informed choices on their own about some of their future responsibilities. Now it's great to see from the [WEALTH at work’s Overcoming the risks at-retirement (2019)] research that some Trustees are putting in place ways to help their scheme members. But it's also true that many are not.” Gareth Tancred
“There is a real problem in that, as time goes by and people purely have DC pensions, there's a real likelihood that without financial education, guidance and regulated financial advice, people will end up with not enough money to have a retirement that they hope to aspire to. This is not just their problem because companies will then be faced with potentially having people who can never afford to retire. So it is far better to provide effort and support to help people make the right decisions.” Kevin O'Boyle
Employee and member engagement
“Engagement is still an issue and it's a really important topic. It's a nut that we just have to crack. Why? Because some of the options at-retirement are incredibly complex. There is a risk of people making poor decisions – and once they're made, they're made. So it's clear that more support is needed. But again, [WEALTH at work’s research shows] 63% of Trustees are concerned about the lack of engagement.” Gareth Tancred
“We started off in 2017 thinking that we wanted a digital integrated app for our employees. But as time moved on that changed, and although we saw some fantastic products out there, we decided to steer away from that and actually identified that members were wanting the face-to-face communication rather than just accessing an app. And because realistically they're not reading literature, we decided to focus the budget and spend on the group workshops together with a guidance service.” Lesley Sutherland
“Group seminars really have a positive impact on interaction and engagement. It's amazing how people open up when they're with colleagues and you have group discussion. I think that people do value being away from their desk and talking about retirement and money.” Lesley Sutherland
Supporting employees and members at-retirement
“Financial education helps members to understand some of the complexities and some of the decisions that have to be made. But also forewarns them about many of the risks that may be out there, such as avoiding tax pitfalls and scams.” Gareth Tancred
“One of the key aspects of our programme was to provide members with a guidance service. We have found that members don't always need advice. Some of them just want some guidance. So we wanted that to be available, free to members but also for members who need advice to be able to go on and receive regulated advice, which they would pay for.” Lesley Sutherland
“I think because of the complexity at-retirement, face-to-face guidance and guidance helplines are often much more valuable – because as soon as you start explaining something to a member, they always have additional questions. An answer to one question just triggers something else in their head and they go, 'what about this?’. I think that’s why it's very difficult for digital forms of support to have that level of interactivity that an individual needs to deal with questions they have.” Jonathan Watts-Lay
“Following the financial education and guidance service we have in place, we can now see members making much better contribution and investment decisions. We are finding more people are invested in the right glide path strategy, contribution levels are up and there's a far greater understanding of the at-retirement options.” Lesley Sutherland
“Studies show that people that take regulated advice can generally expect their wealth to improve. The International Longevity Centre reported that those taking regulated advice can expect to be in the region of £40,000 better off. And again if you think about regulated financial advice from a logical perspective, it can be tailored to an individual’s specific needs and it can also provide that added layer of consumer protection.” Gareth Tancred
“When finding an adviser for members, it is really important that Trustees and sponsors do so through a comprehensive process with proper due diligence. Yes, you need to look at the Financial Conduct Authority’s register, but it's more than just that, you've got to look at the firms, what they do and how they operate and in many cases, particularly in the corporate world, having someone who isn't just a high street financial adviser – look for a reputable workplace specialist.” Kevin O'Boyle
This article is provided by WEALTH at work.
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WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.
