Whitbread: Learn from AE to save freedom and choice

The introduction of the freedom and choice reforms last year were largely welcomed for opening a range of options to defined contribution pension savers, but some raised concerns over the necessity for personal action, contrasted with auto-enrolment’s reliance on member inertia.

Speaking at the National Association of Pension Funds annual conference in Manchester this week, Whitbread's Andy Harrison said auto-enrolment had provided important lessons for the pensions industry in terms of engagement.

The problem here is not one of quality of service, because late in the process we began nudging people towards it… It’s a problem of awareness

Graham Vidler, NAPF

He said: “Auto-enrolment has been really encouraging, it has surpassed my expectations. At Whitbread we have 22,000 people in our auto-enrolment scheme. Our opt-out rate is less than 5 per cent.”

Communicating with members

Improving communications was a key factor in maximising take-up and Whitbread simplified its output and sought to make it more appealing.

“One of the reasons we’ve done that is people have got a choice, they can opt out. We treat them like consumers. We have to engage with them, people need an external stimulus to have a pension to save [into].”

The pensions industry has a tendency towards using jargon, which Harrison said can obstruct engagement efforts, adding the real test for auto-enrolment was still to come.

“The success of auto-enrolment will come out in 10 years' time, because people will then look to see what have they actually got, how big their pots [are].

"I worry their small pots will be eroded by admin costs and fees. I’m a big fan of trying to find a way to aggregate these pots so when people come to use their pots they’ve got something in them.”

However, Harrison said challenges remained in engaging members with their scheme, particularly because of the long-term nature of saving for retirement.

“You pay upfront for an uncertain benefit, and while it is a lot more complicated by the jargon and regulation… it’s a real struggle to keep up with the changes that have happened recently, let alone those coming down the line.”

Lack of awareness

In the following panel session Graham Vidler, director of external affairs for the NAPF, said more needed to be done to promote the pension freedoms to those approaching retirement.

Research from the NAPF showed only 21 per cent of respondents who had made retirement decisions had used Pensions Wise and only 9 per cent of those who were actively investigating their options had done so.

He said: “The problem here is not one of quality of service, because late in the process we began nudging people towards it… and they liked what they saw. I think it’s a problem of awareness.”

Vidler added that people surveyed considered a wide range of assets – such as property, savings and investments – a part of their pension alongside their workplace provision, rather just the retirement products focused on by the industry.

“When people out there talk about pensions they’re talking about a much broader set of options,” he said.