Romi Savova, CEO of PensionBee
(Picture: PensionBee)Both Tory leadership candidates are rightly talking about the cost of living crisis but neither has addressed the elephant in the room – that we simply can’t afford the next generation’s retirement. Pensions is a topic that people find confusing, difficult to grasp and, at best, quite dull. Consumers feel alienated by the pensions industry and are intimidated by the incessant use of jargon and tiresome administration processes. This doesn’t need to be – and indeed shouldn’t be – the case.
Pensions used to be done for you, whereas now they are done to you. Although consumers now have the ability to have greater agency and control over their pensions, they are discouraged by the system every step of the way. This lack of ownership is the root of the problem.
It is widely acknowledged that the State Pension is not enough to fund an adequate standard of living and so, in reality, today people may need to save hundreds of thousands of pounds to retire comfortably. This is a vast sum of money that requires years of careful planning to achieve, yet I doubt many could tell you how many pensions they have, how much they have saved or even how they find this crucial information out. This issue is compounded by the fact that home ownership, particularly among young adults, has decreased at a rapid rate – many future pensioners will face a lifetime of renting their homes.
The pensions industry has, sadly, remained firmly in the relative dark ages – traditional providers have failed to evolve and refused to put customers at the heart of their strategy, creating unnecessary obstacles and delaying digital interfaces. Simplicity, along with rapid, responsive customer service is what consumers need and expect, and rightly so. The pandemic and ensuing shift to online services has only heightened this – and it is a trend that is here to stay. Consumers are also prevented from deciding which pension provider and plan is best for them, as employers usually choose the provider on behalf of their staff.
In addition, consumers are understandably put off by lengthy transfer times, deterring them from switching to the plan most desirable to them. Pension providers just aren’t focused on making transfers as easy as possible – after all, what’s in it for them? Some can take months to complete a transfer. This issue was acknowledged by the Financial Conduct Authority. Back in 2015.
Something that still puzzles me is why so many providers insist on posting paper annual pension statements. This makes the process lengthy and even more off-putting for consumers, preventing them from engaging with their retirement savings. Finding a solution to the climate change crisis is more urgent than ever before, and yet thousands of trees are still being chopped down unnecessarily for paper statements. PensionBee was required to keep its offices open during the pandemic just because the post received from providers needed to be processed – which is indicative of how much needs to change.
Pension providers need to change. It is now more important than ever to use digital technology and focus on innovation, making sure to engage and inform customers about their savings and how to plan for the future.
So, why won’t the industry evolve? Why is it not keeping up with the times? In short, it’s because traditional providers haven’t needed to.
It is up to all of us to change this and make sure that a consistent, united message is established across the industry – namely to make sure that everyone takes ownership of their pension. The new Tory leader should make this issue a priority and regulators need to evaluate every reform meticulously, with the following question in mind – “will this help individuals to take control of their financial futures?” UK businesses, as primary contributors to pensions, also have a responsibility to put pressure on providers to give a better service to their customers.
Finally, consumers – it’s time for you take action as, ultimately, it’s your own money. Take the time to track your savings, engage with your pension and hold pension providers to account. I know how difficult and daunting it might seem, particularly as there is a distinct lack of confidence and trust in the pensions system. But empowering yourself with the knowledge you need to plan ahead for your retirement will be so worth it. Why not give it a go – you won’t regret it.
