The pensions industry has been confusing customers for decades.
Statements written in jargon that you need specialist experience to understand? No idea what your money is invested in? Or what fees you’re paying?
How did we end up here?
Well, the truth is that the workplace pensions industry was built to serve businesses rather than people like you and me. Individual customers can’t voluntarily switch from their workplace pension scheme and switching from prior workplace schemes has been rare.
The result? A very low customer churn for providers and, some argue, a lack of drive for them to engage with individuals and improve their offering.
This issue has been compounded by the success of the government’s auto-enrolment scheme. While more people are paying more money into their pensions than ever before, the low level of engagement and pervasive confusion is serious cause for concern.
Moneybox’s own research highlights the scale of the problem: 60% don’t know how to access their old pension pots, 87% don’t even know what their money is being invested in, 89% do not know what fees are being charged. Is there another industry where customers know so little about what they should be getting and have so little awareness of what they’re paying and to who?
But the next generation are calling for change. Almost 87% of young people would like to be able to bring together all their old pension pots into one place and use their smartphone to manage their pension and see where it will get them over time. 72% would like to find out what fees they are being charged on old pension pots, and two thirds would like to know where their money is invested.
It’s my view that customers will soon begin to demand pensions designed for the way we live today, and simply transfer away if it’s not provided for them.
The rise of investment and banking apps is changing the relationship people have with their money. We increasingly expect services to be delivered in a clear, transparent and personalised way via smartphone apps, by companies that make their customers their number one priority.
Pensions will not be left behind.
I am betting that customers will demand more from their pension providers or simply switch to a better proposition. One that as a minimum makes it easy to check your account balance, see what you’re paying and where your money’s invested, all from your smartphone.
Preferably one that lets you see how pension savings made today can increase your income in retirement. Ideally, one that helps you manage your pension alongside your other savings and investments.
At Moneybox we’re building what we think could be a good solution and we’d love to see existing providers raise their game too.
We also want to see the Government put more power back in the hands of the people. Employees should have more choice over which provider receives their workplace pension contributions, based on the price and quality of service.
The Australian ‘superannuation’ system is a great example of this. It has been well received by the public and has introduced some much-needed competition into an old-fashioned industry. Why not mirror this in the UK and give people the power to choose the best available provider?
With your pension likely to be one of your largest and most important assets, it is only right that you demand more from the industry controlling it. Your financial future depends on it.
Ben Stanway is co-founder of digital investment app Moneybox