Leadership of DC summit: Personalised communication and raising engagement levels over time will be a critical part of successful scheme administration in the new defined contribution environment, industry experts have said.
The introduction of the freedom and choice reforms has forced schemes to reassess their administration and communication strategies to deal with the new environment.
Speaking at Pensions Expert’s annual Leadership of DC Pensions event on Tuesday, Jamie Jenkins, head of pensions strategy at provider Standard Life, said the dual reform initiatives of auto-enrolment and freedom and choice had increased the need for engagement among scheme members.
[Communication] is how we defend ourselves against members making poor choices, getting ripped off and scammed
Neil Latham, Punter Southall
Jenkins said that until a few years ago “people needed to be engaged enough to join the scheme in the first place, nobody auto-enrolled you”.
“It might have been sold to you, but you’d have to sign something or do something... and of course half the people didn’t," he said. "And then, over time, you’d forget about it and you’d get to retirement and do what everybody else did which is buy an annuity and take a quarter as cash.”
He added the new system requires even less engagement under auto-enrolment, adding: “You have to be engaged at retirement, or you have to be willing to pay for advice. How do we take people from zero engagement to the optimum engagement?”
Jenkins added: “Come retirement you now have a multitude of decisions and options that you can take, some of which could be beneficial some of which could be catastrophic.”
Member communication
Neil Latham, principal of DC consulting at Punter Southall, argued engagement efforts were good for the scheme and trustees, as well as the members.
Schemes can use communications to ensure members are properly equipped to deal with the dangers presented by freedom and choice.
Latham said: “[Communication] is how we defend ourselves against members making poor choices, getting ripped off and scammed. We’re in a difficult place now... I think we’re going to see more people less protected, perhaps, by being able to access their money more easily.”
Many schemes use member segmentation to target cohorts of their membership, in order to ensure communications are more specific.
Kim Gubler, director and board member of the Pension Administration Standards Association, said this was just the beginning.
“Systems are better now but we still see an awful lot of people bolting on to old systems, legacy systems, to make them look like new systems.
"There are very few state of the art administration platforms around that can really deal with the flexibilities."
Gubler added that better-targeted communication can be leveraged through developments in technology. "We’re not talking about cohort communication, if you’ve got good enough technology you can do individual communication,” she said.
