Ian Bird, Equity Partner at ACEVO’s Corporate Partner Foster Denovo Ltd, considers the future of pensions and how technology will have an ever-increasing role to play.
I’ve worked with ACEVO and their members for over a decade now and have been a financial adviser for more years than I care to remember. What is clear to me is that the pensions landscape has undergone the most radical changes in the last few years than at any other time in recent history.
We’ve seen increases to the State Retirement Age (with future rises inevitable); changes to the way the State Pension will be paid with a new flat rate pension coming in from April 2016; a cap on annual management charges and the outlawing of commission to pay for advice; the introduction of automatic enrolment and from April 2015, pension freedom.
A client asked me recently what I thought the future of pensions would be. An interesting question and with so much change afoot, it’s difficult to second-guess what the government might announce next.
Technology holds a vital key in making pensions accessible and relevant to us all.
What is clear to me though is that technology will play a critical role in the delivery and success of pensions in a way that it has never done before. In a digital age, where we access data 24/7 on mobile devices, pensions have had to move with the times.
Automatic enrolment is a great example of this, with employers having to automatically put their staff into a pension scheme. Gone are the days of paper-based application forms or pension brochures but now entry in to a pension scheme happens at the touch of a button.
For some charities I have worked with, it’s the ‘automatic’ part of the enrolment process that has caused the most headaches. You need to ensure that you have a qualifying pension scheme and the right process for getting staff automatically into your pension from the outset.
With an estimated 22,000 charities still to stage in 2015 and beyond, there is likely to be huge demand placed upon pension providers as more employers near their staging dates. We’ve already seen a number of mainstream providers turn down some charity clients, limiting the pension choice available to them.
It’s this challenge that led us to develop Enrolsme (www.enrolsme.com), an online solution to help employers get a compliant pension scheme in place in less than a day. Enrolsme is designed so that any organisation without a qualifying pension scheme can complete a simple online application and come out at the other end with a compliant pension with Standard Life or the People’s Pension.
With more and more smaller organisations looking for cost-effective and quick ways of meeting their employer duties, Enrolsme has been welcomed by many organisations as the answer to their auto-enrolment problems.
But getting staff into a pension scheme is just the start. You need to ensure that they understand what their pension choices are and how to plan effectively for their financial future. When you consider that people typically spend more time researching and booking their summer holiday than they do planning their retirement, it’s clear that there is huge need for financial education. Increasingly, employees are looking to their employers for guidance and many organisations expect this to increase in April, when Pension Freedom comes into force.
Again, we’ve looked to technology to help build an effective solution, with the creation of mybenefitsatwork. It enables you to tell each employee about the benefits you provide, using a friendly, interactive website that you brand as your own. Initial feedback from charities is that it’s a really cost-effective way to increase employee engagement and get a return on your investment into pensions.
In my opinion, our national pensions crisis is only going to deepen if we don’t start acting now. We all have a responsibility to encourage employees to be actively involved in preparing for their own retirement, rather than leaving it to chance.
This means that employers will have an increasing role to play in ensuring that the workplace pensions they offer are right for staff and employees are given access to the tools and information to help them make informed financial decisions. Without it, I fear many more people will end up sleepwalking into their later life and retiring into poverty. Technology holds a vital key in making pensions accessible and relevant to us all.
Note: Enrolsme is a non-advised process and other options are available which could better suit your needs. If you want to explore these options you may wish to contact a financial adviser.