This Pensions Awareness Day, Stoneport is urging employers and trustees of Defined Benefit Pensions to rise to the challenge of educating and informing members about their schemes to drive better engagement.
Richard Jones, Managing Director, Stoneport says, “DB pension schemes were set up with a simple aim – to provide their members with an income in retirement for life – but in recent years they have become complex as the regulatory environment has shifted, and the economic and demographic landscape has evolved. The task employers and trustees face to educate and inform members has never been more challenging. Increasing life expectancy means that members rely on their DB pensions for longer, whilst low interest rates make DB pensions much more valuable. And, while pension freedoms provide increased flexibility, they have opened the door to pension scams.”
“The industry is however, responding well. By embracing technology and engaging with communications specialists, the way schemes engage with their members is being transformed for the better. According to research from Buck, member engagement rates increased to between 30% and 40% when members were provided with online, real-time access to their scheme benefits, compared to the industry average engagement rate of around 10%.”
Stoneport highlights that some schemes now provide an array of helpful services to their members. Some schemes have their own websites, providing members with:
- Access to information on scheme benefits and the options they have about when and what form they can take their benefits in.
- Important scheme documents like the scheme’s accounts, statement of investment principles and summary funding statement.
- Scheme booklets and member guides, along with references to external sources of information and guidance.
- Secure portals which provide online access to personal information and allow updates to be made – for example, amending nominations for death benefits.
Stoneport says leaders in Aerospace, Defence and Security, Leonardo S.p.A is a shining example of how much can be done with member engagement, providing three separate websites – one for its multi-award-winning DC offering, FuturePlanner, and one for each of its £1bn plus Electronics and Helicopters DB schemes. The DB sites even have an online modeller, allowing members to estimate their future pension at retirement, and to see the impact of retiring at different ages and taking different amounts of cash.
Large schemes like those operated by Leonardo can do this because they have the scale and resources to provide these things to their members in a cost-effective way. Unfortunately, that is not true of all. Whilst employers and trustees all want to do the best they can for their members, cost pressures often determine what is delivered in practice.
Currently around 80% of private sector DB schemes have fewer than 1,000 members and lack the scale to ever run efficiently and effectively – just meeting the ever-increasing compliance burden can lead to running costs exceeding £1,000 per member every year, compared to under £200 for the largest schemes.
Jones says, “As a result of cost pressures, members of many smaller DB schemes tend to receive just one communication a year. The only way for members to find out more or to engage with their benefits, is by writing to the scheme’s administrator and they want and deserve better support.”
A recent survey from Hymans Robertson found that 47 per cent of respondents would welcome more support on what options are available to them, with just 21 per cent believing that they already have an adequate level of support.
He adds, “With access to the right information and support, members will be better equipped to guard against pension scams and to make sound financial decisions for themselves. Stoneport aims to bring together 100 smaller DB schemes and then to leverage its scale and use technology to provide the ‘best in class’ member experience of a large DB scheme like one of Leonardo’s and radically reduce the running costs.”
Stoneport is a consolidation vehicle for occupational defined benefit pension schemes in the UK with fewer than 1,000 members. It was conceived and developed by Punter Southall and will be managed by Stoneport Pensions Management Limited, a wholly owned subsidiary of Punter Southall. Barnett Waddingham will provide administration services plus the actuarial and investment advisory services required to operate Stoneport. Stoneport will be regulated by the Pensions Regulator, just like the small schemes it provides a solution for.
About Punter Southall
Punter Southall has been developing new ways to transform people’s financial future, since 1988. We help our clients to discover and seize the right opportunities. By listening to them and understanding their needs, we change and adapt our portfolio of companies and services to help deliver their goals. We work with pension schemes, employers, insurers, charities, and private clients to provide expertise in pensions and investments, wealth management, workplace savings, health and protection, and financial data.