Making plans with Nationwide
It was great see Ness, Amanda and Helen at our offices this week for a planning meeting. As always, there is much to be done for the Nationwide Pension Fund and keeping things on track is key. Thank you for your input and looking forward to the next one.
Pensions – Are You Saving Enough?
ITV’s “Tonight” aired a program last week questioning whether the general public are saving enough for a comfortable retirement. “Pensions – Are you saving enough?” challenged three working volunteers to live on their future predicted pension pots for a week to investigate.
It is estimated that 60% of people don’t know how much is in their pension pots and the program highlighted concerns and fears from members of the public regarding the future of their finances. It is estimated that 1 in 4 people are not saving enough for a comfortable retirement and some say this can be attributed to the way pensions information is being communicated. The pensions industry is now working towards simplifying communications so that they resonate more with the general public to encourage people to pay more into their pension pots.
After following the three volunteers, the program demonstrated the difficulty that many people would face if trying to live on the amount per week that they would receive from their predicted pension pot. Despite the introduction of Auto-enrolment in 2012, 1 in 4 people are still not paying into a workplace pension scheme, meaning that they will be relying solely on the state pension once they reach retirement. Retirement planning is important and getting advice from a financial adviser can be extremely beneficial if you have concerns over whether you’ll have saved enough for retirement.
“Pensions – Are You Saving Enough?” is available to watch on ITV Player until the end of May.
Auto-enrolment contributions to increase
The contribution you make to your pension is set to increase on the 6th of April of this year. Both you and your employer will pay an increased amount of 8% through auto-enrolment rather than 5% as in recent years. This increase in contribution equates to an increased amount of 5% of your salary being paid in to your workplace pension, up from 3%.
||Employer Minimum Contribution
||Total Minimum Contribution
|New rate: 6 April 2019 onwards
|Current rate: 6 April 2018 to 5 April 2019
Someone earning the average wage in the UK of £28,759 will be paying £75.41 from the 6th April, which is £29.96 more than the current rate. Opting out of auto-enrolment may sound a tempting option for some, however, by doing so, you are essentially turning down both your employer’s contribution and tax relief from the government, which is free money and could help to grow your pension pot. Another useful benefit of saving through enrolment, is that you could be earning investment returns on your money, which will help your pension pot to grow.
With the State Pension ages set to increase these small increased contributions through Auto Enrolment could pay dividends to your future.
Pensions Lifetime Allowance is set to rise
From the 6th of April 2019, the Lifetime Allowance is set to increase. The Lifetime Allowance is the amount of money that you can put in to your pension savings, before tax charges apply. The amount is rising from £1,030,000 to £1,055,000 for the 2019/2020 tax year. This increase is a product of the Consumer Price Index (CPI) measure of inflation, which determines the change in pension Lifetime Allowance year on year. The CPI measure of inflation this year was calculated at 2.4%.
This change will offer the chance for workers to save more money in their pension pots before they get hit with a large tax sum. Although this is positive news for some savers, there is also the annual allowance to consider, which limits the contribution that workers can pay in to their pension on a yearly basis.
Pensioner income from occupational schemes
Government statistics have revealed that the proportion of pensioner income from occupational schemes has fallen for the first time since 2005.
A study from the Government across all pensioners’ households, showed that the income from occupational pensions provided 27.8% of gross income in the last full tax year, having reduced from 29.9%, which was recorded the year before.
It was recorded by the Department for Work and Pensions (in its publication of its Pensioners’ Income Series) that the fall equated to a drop of £160 to £148 in average weekly income.
Single pensioners faced the biggest cut, with the proportion of gross income declining from 27.6% to 25.1%. Comparatively, pensioners living in couples saw a smaller reduction in the proportion of gross income, dropping from 31% to 29.2%.
Additionally, in 2017/2018, couples saw a rise in gross income by £15 per week, compared with pensioner households who were recorded as experiencing a £3 fall. Single households were hit the hardest with £20 less per week.
Pensioners in receipt of occupational pensions have also declined compared with previous years. Pensioner households receiving funds from a workplace scheme fell from 62% to 59% in 2017/2018, coinciding with a drop in weekly income from £259 to £254. When looking only at recently-retired households, the decline is more significant and those in receipt of occupational pensions dropped from 61% to 55%.
Nathan Long, Senior Analyst at Hargreaves Lansdown describes, “There's yet more evidence that pensioners are being punished as a result of quantitative easing, with income from savings and investments on the slide, the data so far shows that semi-retirement is gathering pace fairly slowly as defined benefit pensions are still supporting more traditional retirements.”
Concert’s crystal ball
With the start of the new tax year on the horizon, many organisations are looking ahead to 2019/20.
The Pensions Management Institute is no exception and this month’s edition of their in-house magazine, Pension Aspects, takes a look at upcoming trends in communication – including an article co-written by our very own Jerry Edmondson.
When communciation doesn’t help
Despite being published on a Sunday, this BBC article about the April increase to auto-enrolment contribution rates didn’t escape our attention.
As communication consultants, you’d be forgiven for thinking our perspective would be ‘all publicity is good publicity’ but there are times when that’s not necessarily the case. This is one of them.
The headline is actually pretty alarmist and negative. You can argue it’s doing its bit to raise awareness but it’s not so easy to say that its raising understanding in equal measure…
If you read the article in full (and many won’t), it’s hard to see why the imminent 2% increase in employee contributions should trigger a significantly higher spike in opt-out rates than the last 2% increase in April 2018.
In the first three months after last year’s increase, the opt out rate was 0.7%. This was only very marginally higher than the previous 4 year average rate of 0.6%.
Since that increase, those who didn’t opt-out (that’s the other 99.3%) will have become used to seeing that 3% deduction. Yes, the incremental step-up to 5% will be noticed but the question is will it be noticed enough to signicicanlty increase the number of existing members opting-out? We’re not so sure.
People being auto-enrolled for the first time could certainly feel that 5% is a bit steep, but a 2% increase when you’re already paying 3% is arguably going to feel less significant than a 2% increase when you’re only paying 1%. You could argue that the opt-out rate in this group may even be lower.
This was always one of the key points of the auto-enrolment design – action though inertia.
Headlines that focus on the ‘hit to pay packets’ and using the soundbites like ‘auto-enrolmageddon’ might be good for page views but by focussing on the negative they do little to help people understand why they need to save for retirement – which is the real story.
Should Trustees take professional communications help?
By Jerry Edmondson
Last week, Professional Pensions publicised the results of its ‘Pensions Buzz’ that asked the question ‘do trustees need professional help with communications’?
I’m not sure whether copyright restrictions allow me to reveal the results (although you can take a look for yourself right here) but I’ll admit to a few pangs of anxiety before the ‘big reveal’.
I mean, what if the consensus was ‘no’?
Could this usher in a new age of ‘homemade’ or ‘DIY’ member communications in which trustees cranked out member benefit statements by hand using an old-style print press like the Croxford Reliant?
Happily, I needn’t have worried.
And that’s good news because, having been involved with the communication of pensions (and other employee benefits) for, ahem, almost 30 years, the question whether or not trustees need professional help with communications simply hasn’t come up. Not once…
Naturally, that’s largely due to the disclosure-driven requirement to communicate. It’s not as if it’s a matter of choice for trustees.
But equally it’s been a matter of access to appropriate and expert resources.
Even if trustees have to send printed matter to some or all members every year, buying and running their own print press isn’t really a viable option. Similarly, if they want to make information available on the new-fangled interweb, Trustees probably don’t want to create and populate their own ‘web-development and maintenance sub-committee’.
So getting help to do what needs to be done makes a lot of sense and, in this context, trustees have ALWAYS needed professional help to communicate with members.
The real question being asked by Pensions Buzz is probably more around the nature of the communications advice given to, and agreed by, trustees.
I've mostly spent those 30 years offering advice to trustees not about whether to communicate with members, or even about what to communicate to them, but rather how to communicate with members.
There was a big shift with the rise of DC, and the recognition that members had to make decisions that could and often would materially affect the quality of their life in retirement. Eventually, DC communication became more about inspiration and less about information as the challenges of helping ‘normal people’ (and that excludes just about everyone reading this article) get their heads around ‘pensions stuff’ became clearer and more acute.
Since the introduction of Pensions Freedoms four years ago, the same challenges have been becoming increasing clear in the DB context too and how trustees view DB communication is evolving as a result.
No self-respecting trustee would dream of failing to seek appropriate professional advice in matters of investment or actuarial valuation. A few may challenge that advice, but I suspect that number is microscopic in comparison to the challenges received in respect of communications advice.
It’s understandable. We live in the communication technology age and we all communicate all the time; so it’d be crazy to think that anyone has no opinion on what is good, or bad, communication.
But, as with actuarial and investment advice, the key to success in terms of ‘doing the right thing’ is listening to appropriately expert advice.
For example, over the years, I’ve lobbied trustee groups to carry out detailed member research many, many times. More often than not, that advice has not been accepted. Sometimes, but not always, for good reasons. But in every instance where member research has been done well, the results have been unexpected and hugely helpful in terms of making member communications more effective. Every instance.
Do trustees need professional help to communicate with members? Yes, absolutely.
But, if trustees really want to help members try and get their heads in the complicated, boring and slightly scary pensions game, then those trustees need professional communications advice at least as much, if not more.
Concert Consulting appoints Lee Bacon as Head of Production
Lee joins Concert with a specific focus on managing our digital, design and production hub in Bristol. Lee’s appointment is Concert’s second major appointment in the last quarter, following the recent recruitment of Jerry Edmondson as Consulting Director, as the business continues to expand.
Prior to joining Concert, Lee held communication roles at major insurer and pensions provider Legal & General and at communications agency Ferrier Pearce.
Most recently, he was Lead Communication Projects Consultant at Sparks, the communication and engagement business of Capita Employee Solutions.
Lee Bacon said:
"It’s an exciting time to be joining Concert. We have an enviable track record of providing creative ideas and innovative solutions for both employers and trustees and I’m really looking forward to helping take Concert to the next level.”
Peter Walsh, Managing Director of Concert Consulting, said:
"We’re delighted that Lee’s joined us. He brings detailed design and production experience as well as communications expertise and industry knowledge. Lee will help us evolve and refine our existing processes, as well as develop new ways of delivering for our clients, so we can continue to delight them."