A new online pensions modeller is being launched for defined contribution members of the Telefónica UK Pension Plan, but some experts have questioned the benefit of such tools.
Technology can help trustees manage governance and investment issues when facing the challenge of regulatory changes, while online tools enable members to keep track of their pensions by seeing whether they are saving enough for retirement.
What you tend to find is that you get a handful of members that use it all the time, but for the majority of members, they just won’t even look at it
David Brooks, Broadstone
Telefónica's new online modeller will “show how an individual’s fund will change depending on the pension contributions that they choose”, said Daniel Blackman, pensions specialist at the Spanish multinational.
Listening to scheme members
Members can include any previous defined benefit or DC pots that they have, and will also be able to change their investment selection choices.
Trustees of the scheme, which has a £1.2bn DB section and a £237.4m DC section, plan to launch the tool on the member website this month.
“We wanted to launch something which our members would find hugely beneficial” as well as “innovative and leading in the industry,” Blackman said, adding that scheme administrators LCP are helping to create a bespoke model.
At the time of writing, the tool was not yet live on the pensions website. “We’re going through lots of testing at the moment,” Blackman said.
It may also be enhanced over time, “to make sure it’s completely all-singing, all-dancing", he added.
To get people involved in their retirement planning, the scheme has conducted several campaigns in recent months. It is “all about listening to our members and getting as much information as possible”, Blackman said.
Keep modelling tools simple
Rod Bryson, principal of wealth, long-term savings and insurance at Capgemini Consulting, said it is not unusual for well-run schemes to have an online tool in place.
“Most good quality pension schemes will have some form of tool that allows members to engage with the system and to understand their benefits,” he noted.
Bryson said some more detailed modellers enable members to see projected growth rates, charge levels and the impact of inflation, for example.
However, the difficulty is that the more complicated you make it, the more of a challenge it is to get members to engage.
When using an online tool, if “you struggle to understand it… you’re probably not going to go back to it”, he added.
The key to a successful online model is to ask members what they want, in terms of what can help them plan for retirement.
Is it worth it in the long term?
Pension modellers can prove useful to members, but they can be expensive to set up.
David Brooks, technical director at Broadstone, said they can be quite costly to establish but noted that, in the long term, these types of tools can reduce costs because the administration team might have fewer queries to deal with.
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“They are good for people that are engaged with pensions and want to know... where they’re going on their journey to retirement,” he said.
“What you tend to find is that you get a handful of members that use it all the time… but for the majority of members, they just won’t even look at it,” he said. “So it ends up being something you spend a lot of time and effort creating, for a small percentage of the membership.”
However, that might be something the employer thinks is worth it, he noted.
