Consumers and the New Pension Landscape

Annual ConferenceThe True Potential Centre for the Public Understanding of Finance

Welcome

One Whitehall Place, 26 November 2015

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Michelle Cracknell, Chief Executive,The Pensions Advisory Service

Session 1: What help and support do people want in relation to pension decisions?

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Helping people make

proper provision for their

retirement

3

Public policy issue

4.3 Help people to make proper

provision for their retirement

• In 2014, income from DB only

schemes is around 40% and

income from DC schemes is

around 5%. By 2060, the

pattern is reversed.

• Receiving a DC scheme amount

becomes a typical outcome for

persons reaching SPA from mid

2020s

• Post 2050, it becomes a typical

outcome for persons reaching

SPA not to receive a DB

scheme amount

Helping people with their

pensions is a public policy

issue of growing importance

with the growth in DC

provision.

TPAS experience for half year

• Volumes up by

81% year on year,

in 6 months

83,500+ customers

(103,000 in

2014/15)

• Great start but

need to encourage

more people to

take guidance

• Need to improve

signposting; earlier

and not by provider

5

Webchat Trigger Webchat subject

Freedom and Choice 14.27% Contract Terms & Eligibility 8.49% April - Sept

Taking Benefits 13.84% Not Specified 8.44%

Information/Quotation Request 11.28% Freedom & Choice 7.48%

Paying Contributions 9.02% Taxation 7.36%

Retirement 6.04% Retirement Planning 7.10%

Helpline Trigger Helpline subject

Freedom and Choice 18.89% Freedom & Choice 11.05% April - Sept

Taking Benefits 16.66% Taking Payments 7.60%

Retirement 12.37% Retirement Planning 6.49%

Information/Quotation Request 7.36% Decision Making 6.20%

Transfer 5.10% Taxation 5.39%

Written Trigger Written subject

Taking Benefits 19.81% Retirement Planning 20.44% April – Oct

Information/Quotation Request 15.56% Freedom & Choice Legislation 15.67%

Paying Contributions 9.71% General Legal Rights 11.89%

Transfer 8.90% SP: General 6.77%

Freedom and Choice 8.39% Contract Terms & Eligibility 6.66%

Insight into enquiries

Step 1

Understanding what the customer has and what is

needed

Step 2

Describing the options relevant to the customer

Step 3

Decide and buy

Guidance – getting Step 1 right is critical

Regulated Financial Advice

What guidance delivers

7

• Most customers do not understand what pensions

they have and what they need to think about

• Guidance helps get people started on the journey.

• Delivered by an experienced, independent and

impartial organisation, it can take people a long

way

• BUT… it does not provide a definitive course of

action

The focus for a public service

should be to get customers

started by making sure that

Step 1 is done and done well

Current market issue is

difficult for customer to

decide and buy without

going through all 3 steps in

the regulated advice

channel

Guidance in action

Guidance in action

Guidance in action

Guidance in action

Pensions are special!

12

Economics – important for UK PLC to get individuals to be responsible for their

retirement income, long tail on products, irrevocable decisions, later life making the

right financial decision critical.

Social - “mass market” product, “invisible product”, multiple jobs, multiple small pots,

workplace no longer suitable venue, employers less likely to want to engage with or

maintain a relationship with ex-employees, start as soon as possible.

Culture – support at key ages and events, retirement is series of events, emotional

time, triggered by traumatic life events such as divorce and death.

Components of guidance

13

Pensions guidance

“Nudge” & “shove” to make guidance the norm

Quality

ImpartialValue

for money

More than customer satisfaction;

specialist knowledge and experience

needed to diagnose issues

In order to be a

sustainable public

service

Signposting at key

life events and age

Able to go up to advice

boundary and to be

Final words

14

Need for a public service

Must be quality/expert, impartial and value for money

Should work closely with the industry to

deliver better customer outcomes

deliver better public outcomes

Joanne Segars, Chief Executive,Pensions and Lifetime Savings Association

Session 2: Pensions policy and the Government’s pension agenda

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JOANNE SEGARS

New times

Pensions and Lifetime Savings Association

AUTOMATIC ENROLMENT: A PENSIONS GROWTH STORY

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Active members ofprivate sector pensionschemes

Employers with an AEduty

FREEDOM & CHOICE

State Pension

PropertyISAs

Work

Annuity

Cash

Bank account

Drawdown

Cash-out plan

Tradeable annuity

£1.5 trillion

(Good) value (for money)Single rate

IORP

FREEDOM & CHOICE

STRONG SIGNPOSTING

Pension tax relief is money lost to the Exchequer forever. Wrong!

Changing the system will give the Exchequer more money. Wrong!

High rate tax payers benefit disproportionately in the current system. Wrong!

A single rate of relief would benefit the many at the expense of the few. Wrong!

Changing the system will make it easier and cheaper to administer pensions. Wrong!

Workplace pension schemes will continue to contribute above the statutory minimum regardless of changes to the system. Wrong!

PENSIONS TAX RELIEF – WRONG!

Consumers and the New Pension Landscape

Annual Conference

The True Potential Centre for the

Public Understanding of Finance

THANK YOU

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www.open.ac.uk/pufin