"Engage." Once upon a time, that word would mean only one
thing to this childhood Star Trek fan: the command that
would set the Enterprise off at warp speed. Many years later,
and with fantastical dreams of intergalactic travel having given
way to a decade-plus career in pensions law, the word has taken on
a different significance for me.
A lack of member engagement has been a long-standing challenge
for the UK pensions industry which persists even though, for many
people, our pension fund will be the biggest pot of money we ever
hold. Yes, pensions are often complex, but that shouldn't
prevent us from empowering ourselves with the tools to help us make
a more informed decision about our retirement options.
Indeed, we know that younger generations are paying more
attention to where their money is invested: that was clear from the
engagement around some of the finance-focused events at COP26. In
the world of pensions, we can point to the success of the Make My Money Matter
campaign - co-founded by film director Richard Curtis - as another
example of the direction we're heading in (Mr Curtis might say it's
"about time"…). This is an opportunity for the industry to
build momentum.
To that end, big regulatory changes are on the horizon.
It's not just the 'carrot' of younger members being more engaged in
pensions, there's also the 'stick' of regulatory intervention
driving pension schemes and the wider industry towards greater
transparency. A couple of major developments on that front
involve climate reporting and the introduction of pension
dashboards.
Climate reporting
For the last few years, pension schemes have been explicitly
required to factor in financially-material 'ESG' considerations to
their decision-making and operations. Specifically on the
environmental aspect of ESG, legislative requirements have now been
ramped up further for schemes with over £1bn in assets, which must
now implement a compliant system of climate governance and then
publish an annual report on it, based on the recommendations of the
Taskforce on Climate-Related Financial Disclosures (TCFD).
It's expected that the TCFD regime will be rolled out to smaller
schemes relatively soon. It's a challenging exercise for
schemes, but the end result should be hugely beneficial for savers
who want to understand how schemes are working to mitigate the
impact of climate change.
Pension Dashboards
Dashboards are shaping up to be a game-changer for the way that
members interact with their pension information. They'll
essentially operate like a switchboard through which someone can
access information on all of their pension arrangements in one
place. The digital architecture is still under development,
but schemes are in scope and pension providers are being strongly
urged to take action now to make sure that member data is in good
shape in time for the regulatory obligations taking effect - for
some, that's as early as 2023. Other nations, such as
Denmark, have already had dashboards for a long time. In some
instances, the dashboard is more commonly used as a means of
accessing information on a pension, rather than going to a provider
directly: we should be prepared for the possibility of a similar
impact here.
Of course, making pension information more readily accessible
through dashboards and bringing climate reporting to the forefront
don't address wider questions around how to improve, for example,
financial education among the public, or whether people are being
given enough (or even, in some cases, too much) information - but
they'll present further opportunities to at least point people to
resources or professionals they can talk to about their options,
such as the Money
and Pensions Service or financial advisers. Something
else that businesses in Glasgow can do is draw employees' attention
to pension awareness campaigns, such as the inaugural #PensionAttention
campaign happening just now, and the upcoming Pension Awareness
event, which runs from 31 October to 4 November, featuring daily
live shows covering some basics about pensions.
These events, as well as the greater transparency offered by
climate reporting requirements and the improved accessibility which
dashboards should bring about, are a great opportunity to start
conversations with employees and drive further engagement.
Let's make it so.
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