Freedom & Choice, are we really free to choose?
21st September, 2015
When presented with an invite with the above heading, I could not help but be intrigued. Theologians have long debated the merits of the seemingly inimical doctrines of free will and predestination so, having brushed up on my Calvinism, and the writings of Irenaeus and Justin the Martyr, I was (only slightly) disappointed to find myself at a trustee lunch hosted by Pinsent Masons LLP to debate this topic in the context of the latest pension reforms.
In attendance we had a balanced mix of professional, employer and member nominated trustees. We also had the Pinsent Mason team and a guest speaker to facilitate the debate. Chatham House rules applied so I shall not go into specific details of who said what.
The topic and debate was wide ranging, first and foremost – what did it mean?
- Are pension savers actually being given access to Freedom & Choice?
- What should Trustees do, if anything, to help deliver Freedom & Choice?
- Has the pensions industry developed sufficient options and products to bring about true Freedom and Choice?
From the discussion it was clear that the changes are revolutionary, we are at an early stage in the revolution and, to quote Alex de Tocqueville, “In a revolution, as in a novel, the most difficult part to invent is the end”
In terms of the role of the trustee in this revolution those assembled, as you would expect, were mindful of the changes but were inclined to take a measured considered approach. The view was that, from a trustee perspective, the focus needed to be on communication and trying to define and drive best practice in the industry on behalf of members.
The trustees present were also very conscious of the fact that trustee led communication would need to set out the available options in a fair, balanced and neutral way to avoid any suggestion that it represented an attempt to manage members out of defined benefits schemes. Trustees of DB Schemes must tread a very fine line in informing members of their rights and options in engaging and regular pre-retirement communications without crossing that line and finding themselves in liability management territory.
There was criticism of generic industry communications developed so far – as an industry we have yet to wean ourselves from our love of obfuscatory jargon. “UFPLS” got an especially dishonourable mention, having being crowned the worst example of pensions jargon by Pensions Age.
There was a consensus that member communications had taken on a life or their own having grown organically as legislation changed, more concerned with tick box compliance with disclosure requirements and covering the backs of providers and advisers than actually communicating the key information to members. The end result is disjointed and unengaging communications rarely, if ever, centered on addressing the needs of members. The approach was summed up by one attendee as “everyone thinks about what to add in to communications, but nobody thinks what could be taken out”.
There was a keen interest in how the industry will develop its approach to the decumulation phase. It was clear from the experience of those attending that, as of right now, there are many barriers out there for members wanting to exercise Freedom and Choice as the industry responds in a measured way to the very significant changes it has been presented with. The point at which a measured response becomes a lazy response may be fast approaching and there was a feeling providers could do more, more quickly.
The trustees present also recognised that there would be a clear need for members to be able to access clear and impartial advice at this critical stage of an individual’s journey through the retirement savings maze, but had understandable concerns about how this will be accessed by the masses, how it would be paid for and by whom.
Events such as this, where peers can get together to think the unthinkable and say the unsayable are an excellent opportunity for sharing problems, brainstorming solutions and challenging accepted wisdom. I’d like to thank Pinsent Masons for hosting the event and all those who contributed to what was a stimulating and challenging, in the best sense, debate.
So finally, what is the answer to the question posed in the title of this blog? I think the only honest answer is “Not yet”. Theologians have been struggling with the question of Freedom and Choice in their particular sphere for centuries. As an industry we need to deliver an answer to the question of Freedom and Choice in pensions in an altogether much shorter timescale.