HELP! I don’t understand pensions

12th July, 2019


    Well in reality this is a bit of an exaggeration – no one asks for help, they simply mutter under their breath that they don’t understand pensions – it is too complicated and the leaflets and newsletters we send them go in the bin, or if we are lucky, the recycling! Or worse, they ask when it is too late for them to make a meaningful difference to their retirement income. Recently I met a member (of a scheme where I am not a trustee) who didn’t know their normal retirement age, let alone any idea of the options available to them in terms of late or early retirement. I have met older members, made redundant and living on the breadline not knowing that they can access the valuable pension they have or believing that they must continue working until their state pension age. Why do members find pensions so difficult to understand? It is so important to have sufficient income in retirement and for members of DB schemes in particular, their pension is such a valuable asset. Have we been failing them?

    For trustees of DC schemes there has been some focus by trustees on member engagement as this is so important to member outcomes. The Pensions Regulator has been doing their bit by highlighting the impact of charges and requiring more disclosure via the Chair’s statement which should lead to better governance and so outcomes. However, I still feel that there is a long way to go with many members not paying in enough or having unrealistic outcomes and not making active investment choices with the majority paying into default funds. The move to more online communication is a positive one and with consolidation of DC pension arrangements into master trusts, who have the money to spend on tools, we should see this area develop further.

    For trustees of DB schemes, I often hear the comment about protecting members from making the wrong choices. However, as trustees we do not know the member’s personal circumstances and we would be serving them much better to give them the tools and knowledge to make informed choices. So we should help members make the right choices rather than just protect them from making the wrong choices. Whilst this is very important, for most trustees, funding issues, investment strategy, end-game planning have been taking up more time on meeting agendas. With gilt yields falling ever lower those schemes that are not well interest rate hedged have generally seen funding levels fall. This coincides with greater scrutiny from the Pensions Regulator who is looking for shorter recovery plans and secondary funding targets. On top of that we have had GDPR and now GMP equalisation keeping us busy. Of course, all of these are very important – making sure there is enough money to pay benefits is at the heart of what we do. But we mustn’t forget the members. Each one is an individual relying on us to ensure their pension is safe and when the time comes is paid to then. But they should also be expecting us to do more – to provide them with the information to understand their benefits in a simple way so that they can make choices that are right for them.

    Communication should be accessible – no more acronyms but plain English, short – because let’s face it most people find pensions boring. It should be regular – if we communicate frequently in a short and snappy style we are far more likely to get members reading what we send them. The use of online should be explored by more schemes as these tools can often take the member on a journey so they see the relevant and can ignore the irrelevant. So as a trustee I hope to not only ensure that members’ benefits are secure and well-funded but that they understand their options and that we don’t put barriers in the way of them making the right choices for them whilst protecting them.


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    • Published byJudith Fish

      Judith is a qualified actuary with over 20 years post qualification experience She is an Accredited Professional Trustee, based in the London office, who works on a range of different schemes. She believes that good governance and collaborative working results in...

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