Tim Phillips of Smart Pension describes the challenges facing the industry to get people engaged with their pensions and make the most of their savings at retirement.
Many words have been written recently about pensions and retirement savings, and there's been dramatic progress made in getting more people to save for their retirement. But there is still much to be done to get people saving more into pensions, to make people's money work harder for them, and to give them the support and guidance needed to help them make good decisions.
Three challenges
The first challenge is clearly to get people saving enough. The mantra needs to be contributions, contributions, contributions. We've made progress in terms of coverage, and contributions go up again in April. This is all good news. But more needs to be done to get people to a decent level of savings in retirement.
The second challenge is investment. We need to get investment working harder for people. We need to deliver full transparency over costs and charges and develop a good and measurable understanding of value for money.
The third challenge is to help people with their decisions. Yes, defaults work and are incredibly powerful, and should be the starting point for most pension interventions. But ostrich-type behaviour and being scared to have conversations with people is not the way to engender a sense of ownership between people and their pensions. We need to help people set, and reach, savings goals. We should help people understand the trade-offs they face, and help them make the most of their finances.
In reality, this is the challenge that people are struggling with the most. In a world of Freedom and Choice, the trade-offs faced by individuals are not easy. But we shouldn't assume that people aren't capable of understanding them. Yes, they might need support and guidance - and we shouldn't expect people to be investment experts. But people want flexibility with a degree of certainty, and as an industry, that's what we should strive to deliver for our customers.
An at-retirement solution
At Smart, we are developing our at-retirement solution that will present options in a clear and engaging way. It will provide help around the trade-offs people face so people can tailor their pension savings to their personal needs and have the information and confidence to do so. It will build on the Financial Conduct Authority default pathways work, so people don't have to be investment experts or make complicated fund choices. But above all, it will support people to come to informed decisions, making the most of their hard-earned pension savings.
Flexible ‘four pot' logic
Our new at-retirement solution will be available to members of the Smart Pension master trust in the not-too-distant future, and we are hoping the solution will act as a catalyst for change more widely in the industry. Our unique ‘four pot' solution is being rigorously user-tested and is based around member experience and need. The four pots logically divide savings between ‘flexible income', ‘later life', ‘rainy days' and ‘inheritance'.
We will also be partnering with other organisations that want to use our platform to provide their own tailored ‘at-retirement' solutions. We set great store at Smart Pension in the customer always being right. The solution we have developed has been created in partnership with the customer - and we have great hopes that this will change the way people plan and make the best use of their retirement savings.
Tim Phillips is director of global clients at Smart Pension
