What Does 2020 Hold for Pensions?
Pension schemes have always had to deal with large amounts of industry and regulatory changes, and now The Pensions Regulator (TPR) has sent a very clear message that robust governance must not be allowed to slip.
The recently reintroduced Pension Schemes Bill will enforce new powers for TPR enabling action to be taken sooner, significant fines to be imposed, a better view of corporate transactions taken to prevent reckless behaviour and help protect savers’ money. Although the majority of pension schemes are very well run, high profile cases such as Carillion and BHS have damaged public confidence in the UK pension system.
We will also see changes to member communications being high on the agenda.
Member engagement with their retirement savings is too low and the Pensions Bill brings some clarity on the future of the Pensions Dashboard (the digital solution that will allow people to see all their lifetime pension savings in one place). Although still some way off completion, Schemes will start to receive details about the data standards to move the Dashboard forward. This could result in Trustees and providers needing to carry out major work to cleanse their data.
Ultimately, this could be good news for members, but the question is ‘will this also help by providing members with a better understanding of their retirement benefits’? Communication with members is key but the message from members remains that information and communications are still complicated and difficult to understand.
Hopefully 2020 could be the kickstart that members and Schemes need.
Staying data safe
We know that the protection of your members’ data is one of your greatest challenges and priorities. It is for us too. We have communication responsibilities for over three million pension scheme members, the vast majority of which involve data management of one sort or another.
I am therefore delighted to report that we have received our ISO 27001 accreditation…. for the ninth successive year. This year saw not just a review but a two day root and branch examination of all our processes around data management and protection. Whilst I am told it was not much fun it has been rewarding!
We have based a number of our other processes on the ISO27001 model and we plan to extend this as we continue to grow the business.
If you would like to hear more please contact your client manager, and as always, thank you for your support.
Online security – not just a data protection issue
While the majority of attacks on websites are by hackers looking to steal valuable personal data, there are a number of other reasons why it’s of crucial importance to maintain strong security on any website or web facing application. This is true even for websites that don’t hold any personal data.
1. Hacked websites can attack visitors
Once a website has been compromised by hackers, they can add malicious software that will run in the browser of every visitor to the site. The damage this software could do is extensive and includes (but is not limited to):
- Redirecting traffic to other malicious websites
- Infecting visitor’s computers with malware, including key loggers than can steal passwords, banking details, credit card numbers or other sensitive information
- Hijacking visitor’s computer resources to mine cryptocurrency or send spam emails
2. Damage to reputation
Sometimes hackers aren’t looking to steal data or resources, they’re just looking to cause mischief or make a political statement by defacing the website of a well-known brand. While there is no loss of data, or threat to visitors, the damage to the website owner’s reputation and the trust placed in them by their members can be very serious. Particularly if the defacement is offensive or antithetical to the values of the company. Reputation and trust take a long time to build but can be destroyed in an instant.
3. Search engine ranking
Google (other search engines are available) periodically checks every website that it indexes for potential security issues and evidence that the site has been hacked. If it finds any issues it will penalise that website by removing it from its search results and adding it to a blacklist. This means that the website will not be found in Google searches, and any browsers that support this blacklist initiative (all the most popular ones) will show a big red warning screen to all visitors that try to access the website. Getting a site removed from the blacklist can be tricky, and requires proving to Google that you’ve fixed the issue and removed all traces of the attack. Blacklisted websites typically lose 95% of their visitors.
How do Concert ensure websites are secure?
All the websites and applications we build are built with security first and foremost. We follow the principles of security by design, the UK Government National Cyber Security Centre’s principles of secure development and deployment, as well as targeting the OWASP top ten web application security risks. This gives us a solid foundation to build secure web applications. To confirm all our applications are built to the required security standards, we insist our sites are independently penetration tested by third-party security experts. This ensures that we have successfully secured the applications, kept our clients’ data and their members’ data safe, and protected their reputations too.
“Keep pension benefit statements simple – or we’ll legislate”
The government will consider legislation to make pension schemes simplify annual benefit statements, if they don’t do it on their own, says Pensions Minister Guy Opperman.
The warning has come after the government released a consultation paper on the simplification of workplace pension statements, with plans for shorter and simpler annual benefit statements, which are less intimidating and more likely to be read.
In the paper, the Department of Work and Pensions (DWP) wants to gather opinion on how to make statements shorter and easier to understand, while addressing three key questions:
- How much money savers have in their pension pots?
- How much money they could have when they retire?
- How can they boost their retirement income?
It looks at how to deliver better annual workplace pension benefit statements that are shorter, simpler and will help members plan for their retirement aspirations and lifestyle.
Opperman wants pension providers to commit to giving savers clear information about their pension prospects, ideally on no more than two sides of A4.
He says: “Pension benefit statements are too long, too wordy, full of jargon and confusing for savers. People don’t read them, and if they do, they can’t make any sense of them. Simpler statements provide clear information that members will actually understand, and this will hopefully encourage them to save more.”
“I want pension schemes to drive forward real change quickly, but, if necessary, I’ll consider regulation.”
British Steel trustees are cleared by The Pensions Ombudsman
The Pensions Ombudsman has rejected a number of complaints against the trustees of the embattled and collapsed British Steel Pension Scheme (BSPS).
The Ombudsman has given final consideration in four lead cases, after accepting 229 complaints in March last year. While each case was individual and differed slightly, all included a point about the lack of information given to members concerning cash equivalent transfer values (CETV) and/or early retirement factors (ERF).
They concluded that the trustees were proactive in providing information which was clear and well explained and noted that it was not misleading (and was not intended to be) and did not amount to scaremongering.
At the time, reports emerged that BSPS members received poor communications, which tried to outline the issues and developments of the Scheme restructure and expressed that “no action was required” which sparked no concern or interest from the members.
The complaints follow the long-winded fallout of poorly advised Defined Benefit (DB) pension transfers to members of the old BSPS Scheme, who in 2017 were given the choice of staying in the original Scheme and going into the Pension Protection Fund; moving to a new Scheme with better benefits - BSPS2; or transferring out of the Scheme all together.
As a consequence, the calculation methodology behind CETVs and ERFs was changed on 1 April 2017, with the result that members who requested a transfer value or retired early from the old Scheme after that date, received significantly higher benefits than those who had already transferred out or taken early retirement.
The case illustrates the difficulties faced by the trustees in trying to explain what can be complex and fast-moving issues, and the difficulties faced by members in trying to understand and act upon the information they receive.
An independent review into the handling of the BSPS scandal, highlighted that trustees could have done more to direct BSPS members to regulated IFA’s, as some Scheme members were targeted and pressurised into transferring their money into dubious investment Schemes by unscrupulous, unregulated financial advisers.
It also stated that it was clear that some members of the BSPS had suffered as a result of inadequate communications, rushed timescales or bad advice, but that it was important to look at the issues in context to make sure industry regulators and trustees learn how to protect members involved in future pension Scheme restructures.
Adding explainer videos to boost member engagement
Ensuring your members are well-informed on complicated topics like Expression of Wish or their Pension Benefits can be a challenge. Explainer videos are great assets to add to your pensions website because they help explain this complex information in a simple way, essentially getting the basics across step-by-step in a short amount of time.
We often produce short animated explainer videos, and recommend they are no longer than 90 seconds, as viewers are more likely to watch them in full. These videos help boost digital engagement and can be used as places to go for further information through links from other publications.
Below you can find links to examples of the videos that we’ve produced for our clients on some of the topics mentioned above:
The science behind it:
By utilising multiple senses, auditory (voiceover) and visual (infographics and animation), the human brain can absorb more information in a shorter amount of time, but more importantly, the viewer is more likely to understand difficult principles and retain them.
Richard E. Mayer (Professor of Psychology at the University of California) formulated the Cognitive Theory of Multimedia Learning (Mayer). This principle known as the “multimedia principle” states that “…people learn more deeply from words and pictures than from words alone.” 1
This theory proposes three main assumptions when it comes to learning with multimedia: 2
- There are two separate channels (auditory and visual) for processing information.
- Each channel has a limited (finite) capacity.
- Learning is an active process of filtering, selecting, organising, and integrating information based upon prior knowledge.
- Mayer, R. E. (2009). Multimedia Learning. Cambridge University Press.
- Mayer, R. E. (2002). Multimedia learning. Psychology of learning and motivation, 41, 85-139.
A busy 2020 is predicted for the pensions industry
Pension experts have forecast a hectic 2020 for the industry, with the expected Pensions Schemes Bill and increased calls for responsible investment top of the list of activity.
Although Brexit negotiations could delay the bill, collective defined contribution (DC) scheme legislation, increased powers for The Pensions Regulator (TPR) and the introduction of the pensions dashboard are likely to feature in the coming year when the bill is introduced.
Climate-friendly investment strategy regulation is reportedly likely to increase, with pension schemes’ best practice expected to face further scrutiny.
This year is set to be a turning point for pension schemes getting to grips with environmental, social and governance (ESG) issues, with climate change being a hot topic.
Regulators will continue to demand action with trustees being required to make additional disclosures on their planning and management of material ESG risk factors within their Statements of Investment Principles by 1 October 2020.
It’s expected that there will be a revision and tightening-up of best practice regarding pension funds embedding climate action into investment strategies.
It’s not enough to simply create frameworks such as sustainable development goals, pension funds will have to look at them from an investment point of view to map their portfolios and align themselves without impacting the expected risk adjusted returns.
There are three changes that are confirmed for 2020 – the state pension age will rise to 66, the state pension will increase by 3.9 per cent to £175 a week and the lifetime allowance will increase to £1.073m, in line with the consumer price index.
Several other regulatory reviews look set to improve outcomes for pension savers, with regulators pressing for schemes to consolidate, leading to better governance and economies of scale.
Designing pension comms to pack a punch
Presenting pensions information in a user-friendly way can be a challenge, but one where design can play a vital role. To grab members attention and keep them engaged, here are a few ways we use design and graphics to fine tune good content into polished and engaging communications…
Breaking large amounts of copy down into punchy sections and establishing a typographical hierarchy for headings, paragraphs, pull-out quotes, hyperlinks etc. helps bring about order and allows the reader to prioritise information. By doing this, members can see top level information at a glance and drill down to the detail if they want to learn more.
By tapping into common visual language using a set of cohesive icons we can add colour and visual interest whilst communicating an idea quickly. Icons are particularly useful in digital communications where they represent something functional, like a play button or in a navigation menu on a mobile device where space is at a premium.
These can be a useful way to ‘shine a light’ on key facts and figures. There are a multitude of options to show different types of data, and for websites charts can be interactive, displaying sets of specific data by tapping or clicking on headings.
Where a collection of data or a process, requires explanation, sometimes an infographic is the best solution. Infographics are a collection of imagery, charts and key text which collectively convey information quickly and clearly. As with all good design elements, as well as being visually interesting and engaging, the key point is that the infographic communicates and helps the reader understand the content.
All of the above should be produced in a way which incorporates elements of the brand identity, ensuring that all communications are consistent in look and feel, are easily recognisable and carry the right tone.
Millennials are driving interest in sustainable investment
Sustainable, socially responsible or ESG (environmental, social and governance) investing is on the rise, in companies or funds which aim to achieve market-rate financial returns, while pursuing positive social and/or environmental impact.
According to a number of studies, millennials (born between 1981 and 1996) are universally more engaged in corporate social responsibility efforts and are driving up demand for sustainability, looking at how they spend, where they work and how they invest.
As responsible investing becomes increasingly mainstream, and millennials become the major beneficiaries of the transfer of wealth, institutional investors, such as pension funds, amongst others are expected to pile into ESG over the next few years.
However, in an analysis of 16 of the largest pension schemes, just two schemes were directly engaging with large global companies on their role in the climate crisis. And were the only schemes to go into depth on climate change, acknowledging the need for robust engagement with companies in their portfolio to reduce their carbon emissions.
The vast majority are falling short on climate change duties, despite new regulations introduced in October last year, which require schemes to publish policies on how they specifically incorporate climate change and other environmental, social and governance (ESG) issues.
On a more positive note, the analysis did also find an increase in the amount of ESG and climate focussed funds' incorporated into master trusts default asset allocation.
ESG issues are now the top priority for millennials. They understand that it’s perfectly possible, and increasingly necessary to make a profit, while positively and proactively protecting people and their planet.
They are driving up demand for corporate social responsibility and sustainability more than ever, and with sustainable investing drawing more support, millennial investors will continue to lead the way.