Making pensions less scary
25 November 2018
This article was featured in the December 2018 / January 2019 issue of the magazine.
Henry Tapper, director of First Actuarial, discusses what can be done
Some of you attended a panel debate that I participated in recently. If you did, you may have sat through Neil Esslemont and I having some light-hearted exchanges on pension matters.
I enjoyed the conversation in front of some of payroll’s finest and, from the feedback, I suspect so did those listening. For the record, you told The Pensions Regulator (TPR) it could be doing more to help HM Revenue & Customs give the promised incentives to low-paid workers using net-pay pensions. Though you thought TPR is doing a good job in helping those previously excluded from workplace pensions you were divided about whether Neil and his team were really helping ordinary people get to know their pension.
I spent much of October wading through nearly 4,500 pension questions submitted to the government body, The Pensions Advisory Service (TPAS). They are on all kinds of topics, and I’m glad they were all anonymised as I felt like sending a lot of people emails saying: “it’s not like that, it’s not like that at all!”
People don’t understand pensions and they find them scary – the questions showed this, as did the audience participation in the debate. I don’t think it’s just a matter of pensions being complicated, as tax is complicated and so is the business of paying people a wage. But pensions seem to be shrouded in mystery.
I’ve lost track of the number of times people have started a conversation with “I’m not a pensions person but…”. It’s as if they don’t feel entitled to have an opinion and must apologise for even engaging me on the topic. I’m ashamed that ‘pension people’ have allowed a divide to build between the people they serve. This doesn’t happen elsewhere, and certainly not in payroll.
...hard to give straight answers to people’s simple questions
One of my favourite jobs is as Radio London’s ‘pension expert’. I tease Petrie Hoskins, who does the early morning show, for not having a pension. She points out that she’s scared stiff of pensions and that she doesn’t expect to see her money back. I tell Petrie that pensions are not scary, they do give you your money back and they pay you a wage in retirement.
Petrie is not alone. Many people asked TPAS how they could track down pensions, with one stating “I’m not expecting you can help as I think my pension is well and truly lost”. Reading on, I discovered that his/her pension was one that my company First Actuarial administer. Because the message was anonymised, I couldn’t contact that person. I could have cried.
It’s not just ‘lost pensions’ that scare people. Another question asked for an explanation of a pension illustration they’d received from their workplace pension provider. Apparently, the person had asked a question of the pensions administrator who’d sent a bundle of papers in response including the trustee chair’s statement. All this person had wanted to know was “how’s my pension doing?”.
We in pensions find it hard to give straight answers to people’s simple questions. Small wonder people think pensions are scary.
Some of the questions I read were looking for more than information. Some were asking what they should do but TPAS can’t give advice. The things people wanted advice on were not the kind of things they’re likely to get help for from financial advisers.
Many simply wanted to know how they could get their money back. Some wanted to know whether they can transfer small pots into one big pot and how they could work out which pot to make the big one. Most of the questions weren’t about saving more, they were about spending – they were about getting paid the pension they were expecting. All of which may resonate with you, personally or professionally.
When I listen to the pension experts who I spend most of my time with, all I hear is “save, save, save”. Hardly anyone in pensions wants to make spending of retirement pots the priority. The cynical person in me supposes that this is because we make money out of your savings – not your spending.
When we talk with TPR we should be talking as representatives of the people who are saving and who need the government’s help. We should not just be listening but asking questions of and challenging TPR.
Similarly, we should be encouraging the people in the workplace pensions in the companies we work at and work for not to be scared of pensions but to ask questions and demand answers.
It’s our job to make pensions a little less scary. I hope that my conversation with TPR shows that even Neil Esslemont is just the same as you and me – a really nice person.