What is the most important feature of a good DC scheme?

Perhaps the most prominent is the need to increase member engagement, either in encouraging members to contribute more to their pots, or through supporting members as they make important decisions. It is unsurprising then that over the past two years scheme representatives have told us that good communications are the most important feature of DC provision.

Schemes increase focus on pension comms

Since 2015 we have conducted an annual survey of 200 trustees or pensions managers of large DC schemes, and each year we ask an open question about what they believe to be the most important feature of a good DC scheme. We subsequently categorise their responses. 

While new technologies are certain to play a prominent role in delivering scalable, cost-effective solutions in the future, let us not forget the benefits of old technologies

In early years fees emerged as being most important. Of course, in 2015 the charge cap was introduced, which forced schemes into limiting member charges to a maximum of 0.75 per cent, and as a result, compliance with the charge cap was high up the agenda for pension plans.

In the past two years, however, pensions communication has taken over as the most important feature of a good pension plan. Schemes and their providers have taken this on board and are adapting their member communications strategies in order to increase member engagement.

One way of doing this is through the adoption of new technologies. Many providers and consultants use robo-advisers, and employ newer forms of media such as personalised videos that encourage members to take action.

Providers have been developing mobile apps or have found ways of integrating Amazon Alexa and Google Home Action into their propositions, for example.

The Pensions Dashboard could also be a key piece of technology that may improve member engagement. An additional benefit of digital solutions is that they allow providers to gather data on member behaviour.

Technology is not the be-all and end-all

While new technologies are certain to play a prominent role in delivering scalable, cost-effective solutions in the future, let us not forget the benefits of old technologies.

Findings from a survey of DC plan participants in the US by Broadridge showed that 73 per cent of millennials listed in-person communications as their preferred mode of communication, higher than for any other medium.

Schemes are also using new tactics in their member communications. For example, providers use key dates (eg run-up to pay increases, bonuses or retirement) as triggers for engaging with members, whether through sending out ‘wake-up’ packs or through building up broader advisory propositions.

Techniques such as ‘gamification’ have also been used, which ‘reward’ members for interacting in certain ways with a communications platform. 

Since the introduction of pension freedoms, it has become hugely important for providers to engage with retirees who have entered drawdown. Annual MOTs have been considered as a way to help customers understand if their withdrawal rates are too high (or indeed too low), relative to what could be considered sustainable.

As always, it is unlikely there will be a one-size-fits-all solution, with different members having different needs. But better communications will likely lead to better outcomes for all stakeholders.

Jonathan Libre is a principal in the EMEA Insights team at Broadridge Financial Solutions

Interested in LGPS? Register now to attend the Pensions Expert Local Government Pension Scheme Forum on September 12 2019 live.ft.com/LGPS