Getting it wrong
Not very long ago, Scottish Widows’ annual pension statements consisted of about 30 pages of solid, undifferentiated text. No concessions at all were made to recipients’ understanding or even interest. Perhaps I shouldn’t single out Scottish Widows here: this anti-tree stance and dogged adherence to regulations at the expense of clarity and brevity was the industry norm at the time. It’s just that I particularly remember Scottish Widows’ screeds because they used Courier font. This made statements look as though they’d been produced on a manual typewriter. Every time I saw one of them I was put in mind of some etiolated Dickensian clerk, gloomily churning out reams of impenetrable crap, turgid with jargon, day after day.
We’re only talking about a few years back but it seems like aeons ago, things have improved so impressively since then (especially at Scottish Widows). Earlier this year, however, we at EBC took enquiries from a number of employees who have pensions with two providers I’ll kindly refrain from naming. They’d received statements in late March, roughly a year after the 12 months they covered. These statements weren’t merely useless, they were actively misleading. They contained figures dating back to the immediate aftermath of the precipitous market fall from mid-February to mid-March 2020, so they showed something like a 20% drop in the value of the recipient’s pension. The employees I spoke to were alarmed until I explained. Then they were simply exasperated. Why were they being sent something so out of date?
I note in passing that you could hardly have a better argument for the importance of registering on providers’ websites and/or downloading their app, and keeping tabs on your policy in real time.
Getting it right
We know, of course, that the DWP has recently published its Draft Statutory Guidance: Simpler Annual Benefit Statements paper. Some fudging on disclosing charges seems likely, so we thought we’d set out EBC’s views on how we believe statements should improve.
- Remember, having a list of names and contact details doesn’t mean you have a captive audience. You have to work to gain their attention.
- Statements must be issued promptly after the period they cover: ideally within a week; within a fortnight, tops. Out-of-date information seems more futile than ever nowadays, when up-to-the-minute news is at our fingertips.
- All pension comms should be purely electronic if at all possible. Letters are passé. Aegon’s ARC proposition is only offered to employers where every employee has an email address. With Smart Pension, only scheme members who fail to provide an email address get paper statements. As far as I know, most providers offer a go-paper-free box to tick when members register. We’d like to see electronic comms as the default everywhere, with provision made for the tiny percentage of employees who somehow still live their lives offline. Graph courtesy of Aviva.
- Be succinct: one side of A4 if possible (but, fair enough, that might be tough). So, two sides of A4 max.
- Simple clear language! How often does this have to be said? Some jargon is unavoidable; it needs to be unpacked.
- Lots of colour plus infographics, pie charts and the like make dry stats come to life. Don’t be afraid of using large print, either.
- Items that must be included:
- Current pension value
- Historical value
- Total contributions received (employer + employee) and any other payments in
- Funds invested in
- Total expense ratio for the default fund — with a note about alternative funds bearing different charges
- Projected retirement income (with growth assumptions used)
- Potential retirement income if personal contributions were increased by a certain percentage. 5%? 10%?
- We’d also like to see providers confirm whether or not a death benefits nomination form is held. This is a deplorably neglected area. If a form isn’t held, policyholders should be urged to complete one — a simple electronic process in most cases nowadays. If a form is held, a reminder about keeping it up to date would be good.
- Finally: plenty of hyperlinks to the provider’s website, please: financial healthcheck, how to switch funds, fund list, how to transfer, projection tools, info about lifestyling, options at retirement, and so on. Important topics that are too large for statements to explore and that should be easy to locate on attractive websites.
Promoting member engagement
Is this a preachy blog? Probably. But in the EBC pensions team we spend a large chunk of our working life urging employees to engage with their pension. In truth, many employees, until retirement looms, are indifferent unless they’re nudged. Providers, to their great credit, have really upped their game in recent years. Their best chance of promoting employee engagement is when policies are opened. Thereafter, statements offer them an unmissable annual opportunity to strengthen the relationship with their clients.