More needed from Govt for Pension Freedoms to work
Pension Freedoms require action from the Government to help educate and inform the public on pensions, argues Andrew Pennie, marketing director & head of Pathways, Intelligent Pensions
The new pension freedoms were always going to rock the pensions boat. Suddenly, people had a whole new way of spending their money in retirement. But as the industry gets to grip with the sheer mechanics of changing systems and rewriting scheme rules, it’s also starting to think of the wider implications. As we give people new choices and new decisions to make at retirement we have to consider new ways of educating and informing them.
The Pensions Policy Institute (PPI) has been considering whether there are any lessons we can learn from abroad to help the UK do this. In its Briefing Note number 76 it considers some international examples of financial education and wonders if these can be adopted in the UK.
The PPI starts off by thinking of the factors people need to consider both in the accumulation and decumulation phases, as well as what information sources are currently available. The emphasis up to now has been on written information – letters, pamphlets, analysis etc., but there is a growing appreciation that this is not sufficient. A greater range of retirement patterns means a greater variation in how individuals approach and deal with retirement. And that means thinking wider than the written word.
How it’s working in other countries
Part of the problem for retirees is not knowing what pension money they have in total and from where. In Sweden they have a pensions dashboard that allows individuals to see information about all their pension entitlements – both private and state – in one place. This idea sounds great. But it has been bandied around the UK for at least the last 10 or 12 years. Part of the problem lies in getting all the private pension companies in a position where they can share data about all pension schemes – including the old rickety ones. But we also need the State forecasts to be accurate. And that’s a tricky one at the moment.
In New Zealand, they have the ‘Sorted’ website, run by the Commission for Financial Capability. This aims to promote saving for income in retirement, but also covers other general financial information. No doubt the Money Advice Service had Sorted’s success in mind when it was developing its own website. But it’s not made the same impact. Maybe we need more of a focus on pension saving and spending than MAS’s more scattered financial approach.
Another international example of financial education is ‘Pensionedriedaagse’. In the Netherlands, for three days each October pension providers, employers and advisers work together to inform the public on their pensions. At the same time every pension scheme member is given a ‘Uniform Pension Overview’ of all their state and private pension provision in one place. The UK is trying similar tactics. The Institute of Financial Planning (IFP) run a Financial Planning Week, where financial advisers hold open surgeries to help people. And a few weeks ago Pension Geeks and Scottish Widows joined forces to hold a series of Pension Awareness Days.
Consumers need to see their total pensions worth
There is no doubt all this helps. But some Government backing would improve it considerably, and a joint pension statement acts as a trigger to get people thinking about their later life finance.
The UK is evolving. Providers, schemes and advisers are working hard to devise new ways to communicate retirement choices. But we still have a long way to go. A big problem is getting the right information to people at the right time. The Government now needs to start putting into action the development of an UK composite pension statement. So we can all get on with the job of helping people to make the best retirement choices.