Wake Up Packs are finished so what’s the next at-retirement communications silver bullet?
23 April 2015
The arrival of Pension Freedoms earlier this month served to add heat to the debate about the many and various ideas for replacing or supplementing the at-retirement Wake up Packs which by common agreement are not doing the job. It’s been an oft debated problem for more than six years, ever since The Pensions Regulator and the ABI tried to tackle it.
Of course the issues in those days were very different. Primary considerations which the Wake Up Pack addressed were then: Are consumers that are buying an annuity using the Open Market Option; and do they know enough about different types of annuities to make the right purchase, ideally in discussion with a financial adviser?
But at-retirement decision-making has just got so much more complicated and the hysteria around Pension Freedoms may lead consumers to make rash decisions including cashing in their retirement savings or even cashing in that annuity they’ve already purchased.
There is also increasing recognition that many people approaching retirement (which for pension freedoms purposes is now 55 years old) are not always coming to the decision with adequate financial education or sound independent financial advice. The advice gap, as it has been termed, is to some extent being filled with a Government-backed Pension Wise website and the telephone, web and face to face ‘guaranteed guidance’ offerings from TPAS and the Citizens Advice Bureau.
But in the digital age everyone wants answers online and fast. They want to know if there’s an App for that. They are not going to reach for a lengthy and highly technical Wake Up Pack, however well-intentioned and constructed it may be. The FCA, Treasury and the DWP have all been working feverishly with a number of providers to come up with some statutory online tools to paper over the education cracks and support positive outcomes for consumer approaching these momentous and complicated decisions.
When planning for retirement there are many factors to gather up and consider:
1. Savings so far built up
2. Volatility - security of those savings based on investment selections and split
3. Duration prior to full retirement
4. Retirement income expectations
5. Longevity – how long am I likely to need to draw on these reserves
6. Effects of inflation
Two main big ideas have emerged in recent years. The first is the Pensions Passport which is essentially a simplified version of the Wake Up Pack. Lots of work has gone in on this since 2010, with the prime movers being the Treasury, the Government’s own Behavioural Insights team otherwise called the ‘Nudge Unit’ and LV=
LV= head of retirement and change Phil Brown said the Pension Passport “is about testing whether giving customers less, but more relevant, information is more productive than giving them more.”
Clearly in a digital world in which we read much of what we need to do our jobs and organise our lives on a smart phone, tablet or laptop; and are already groaning under the weight of all the information that is currently being thrust at us, less definitely is more.
Scottish Widows have decided to put theories and ideas into practice and have gone out early with its own Pension Passport. Robert Cochran, at retirement specialist at Scottish Widows, told FTAdviser that “its passport is currently sent out with wake-up packs, which include a one-page Pension Wise flyer, a Money Advice Service pension guide, a statement of benefits, and a guide on helping prepare for their retirement. I think we are one of the first to do this,” he added. This clearly seems like a good step in the right direction and goes some way to get us to Wake Up Pack Mark II.
But there is another major online pre-retirement planning tool being championed by the FCA simultaneously gaining ground. Called, the Pensions Dashboard, this ‘interactive digital tool’ has been developed and rolled out successfully in Holland already. The idea is that consumers are able to access a secure portal which contains all sources of potential retirement income in a single online view. So long-term savings, property income, state and personal pension pots, can all be viewed in one place.
The Dashboard could be extended take you into playing with various scenarios for different types of retirements. It could become the place where consumers can engage in the otherwise thorny issue of planning for phased, and eventually full retirement. All good planning starts with an up to date understanding of the ‘status quo ante’ so the dashboard makes absolute sense if we can work out how to fund its development.
We are watching both developments with great interest having recently rolled out our own pre- and at-retirement online planning tools. This is a new world for the whole market in which digital consumption and consumer online behaviour will have to be properly tested and understood. The Test, Learn Test again mantra of iterative development has never been more relevant for online tools developers than now.
Did you know for example that consumers are on average checking their mobile phones every six minutes today? I think we all remember the time not too long ago when leaving your phone at home by mistake was no big deal. Today it is enough to de-rail most peoples’ already over-stretched days. We have arrived at the point where retirement planning ought to be do-able on the move, whilst on a train journey between meetings or after hours. We need to build the tools and the Apps to make all that possible.