At-retirement support weakest link in workplace pensions

Some 162 sponsors were asked to rate their satisfaction with their workplace provider by analytics company Broadridge. Its index showed broad content with the services provided, with an average score of 3.34 out of 4.

‘At-retirement support’ was the lowest-rated category with an average score of three, and anonymised respondents suggested the industry has work still to do in this area.

They wouldn’t expect to have to transfer money to another bank account before they spend it. Customers will find it both burdensome and strange to be asked to move their workplace savings to another product in order to spend some of it

Catherine Stewart, Scottish Widows

“Post-retirement options can be inflexible with our current master trust supplier. Master trusts often deal with smaller pots, but as bigger funds are transferred to them they will need to offer more post-retirement options,” one surveyed employer wrote.

Several employers said they would switch providers if their incumbent did not improve its service to staff: “Member experience is a vital issue for us – if our members are not being supported then this is a big problem, and would encourage us to switch.” 

Accumulation work undone by retirement gaps

Pensions experts agree that there is a key role for providers in bridging the financial literacy gap. 

For example, Kay Ingram, director of public policy at LEBC Group, says few retirees understand “tax treatment of flexible pension withdrawals, both in terms of the income tax taken at source, which often results in over taxation. Finding out about a tax bill or future restriction only after it is too late to change it is not fair”.

Alan Morahan, managing director of employee benefits consulting at Punter Southall Aspire, says not planning for this let down good work done in accumulation: “There is a huge amount of great work being done to ensure that members are in very well run schemes, which have delivered everything that could be expected of them only for that good work to be undone because members make poor decisions at the point of taking benefits.”

Satisfaction was also relatively low with the products offered at retirement, scored at 3.2

Richard Birkin, head of defined contribution at Isio, notes: “At the low end, we see clients in existing schemes having to transfer products and incur charges so that drawdown can be offered. The providers who have really got to grips with the change take their clients on one complete journey through drawdown with the same charges.”

Catherine Stewart, head of workplace pensions at Scottish Widows, endorses this. She says the contrast between pensions and banking — the financial product most familiar to consumers — casts a bad light on retirement savings.

“They wouldn’t expect to have to transfer money to another bank account before they spend it,” she says. 

“Customers will find it both burdensome and strange to be asked to move their workplace savings to another product in order to spend some of it when they reach retirement age.” 

Clients should demand more

Member support, at 3.2, also scored comparatively poorly. Mr Birkin says: “Providers often have lots of good support available, but they don’t advertise it well so the employer is not aware.

“A good provider should offer different communication tools depending on the individual, whether they are written, video, speaking to someone or animation. A good provider can map out the membership population and tailor their offering to what they like,” he adds, warning: “If a provider can’t do that, it’s time to change provider.

“The minimum expectation is that there will be paper communications, the opportunity for a phone call, online access, an app and consistent reminders. A ‘nice to have’ is full guidance and advice through a full Financial Conduct Authority-registered specialist, either through an arm of the provider or where they have joined forces with a specialist adviser.”

For Nathan Long, senior pensions analyst at Hargreaves Lansdown, evidence that providers are driving better outcomes for members is key. “There is a danger in lining up all the bells and whistles that a provider offers and assuming the provider with the most tools, or the snazziest ones, is the top pension plan,” he says.

Of the 72 that attributed comments to a provider that was named at least twice, Capita headed the overall rankings across 10 different criteria at 3.79 on the pollster’s bundled satisfaction index, albeit with only four respondents citing the company.

Stuart Heatley, managing director at Capita Pensions Consultancy, says: “Over the past 12 months we have invested a considerable amount of time and money in ensuring that both employers and members have the support they need, when they need it. This was recently demonstrated in our reaction and ongoing delivery following the impact of Covid-19.”