Trust is critical to any relationship, particularly in the pensions market. To be successful it is not enough just to be an expert. Other people must trust that you will use your expertise to help them. Here we explore the components of trust and what pension professionals, and trustees in particular, can do to build stronger trust-based relationships with employers and scheme members.

When members pay in to a pension scheme, they are trusting that the fund will support them decades in the future. When employers pay in, they are trusting that the scheme will look after their workers’ future interests and honour their responsibilities.


Members trust you to invest their hard-earned money, in good faith that this investment will support them at a time when they are more vulnerable; a time when through old age or infirmity they may be unable to work anymore or, at least, will no longer want to. After many years of working in the industry, it is sometimes easy to forget what a big ask this is.

As such, it is so important that we are trusted as a profession and as individuals.

Recent high-profile misuses of pension funds, at Carillion and BHS for example, have eroded some public trust in the pensions market. So how can we restore and increase consumer trust?

In part, this needs to be done industry-wide and this is a key focus for the regulator and professional bodies like the PMI. However, pension professionals should look to go far further that the standards set by the regulator both as a point of professional pride and to secure a competitive edge over their rivals.

So, what can you do increase trust? How can you develop your reputation as a trusted professional?

In their highly respected book ‘The Trusted Advisor’, David Maister, Charles Green and Robert Galford argue that the key to professional success is the ability to earn the trust and confidence of your clients. They suggest that there are four primary components of trustworthiness and show how these interrelate in The Trust Equation:

In other words, in order to inspire trust and be trusted, you need to demonstrate that you are credible and reliable. You also need to be able to build a connection with the other person to enable you to share concerns and ideas; the intimacy part of the equation. To build trust, you should look to increase your credibility, reliability and intimacy. At the same time you need to reduce your self-orientation. Put simply, you need to be there for them, not for you. You need to demonstrate that your focus is on the other party; on the members, the employer, your client, not your own interests.


So, let’s examine each of these in turn and how they can apply in the pensions market.

Credibility

Credibility is about ensuring people have confidence in your words; ensuring that a member or employer can say ‘I trust what she says about my pension fund; he knows what he’s talking about.’

Most professionals will be confident in their credibility. The qualifications required by the regulator, your membership of professional bodies like the PMI, and your years of experience, all indicate that you have the expertise and experience to be credible.

Yet having this knowledge and experience is not enough. You need to communicate and demonstrate this to members and employers.

Think about experts in other industries who you believe are credible. Is your belief based purely on the strength of their CV? Or is it a result of how they act and behave, and on how they demonstrate and use this expertise?

Those outside our industry may be unaware of the latest regulations and protections in place. They may not have heard of your qualification or be aware of what it represents. Make sure you are prepared to illustrate and demonstrate your expertise.

Reliability

Reliability is about ensuring your actions meet your words. It is about ensuring that you fulfil your promises. That, for example, an employer can say ‘I can trust him to run my company pension scheme efficiently’, or even, ‘I have confidence that he will challenge me, if I make a decision that will negatively affect our pension scheme.’

Reliability is strongly linked to consistency. Now, with any long-term investment, reliability cannot always be seen in the short-term. For example, typically investments will not always rise, month on month. Ensure this is not just explained but understood, so that as and when it does happen, such an event does not impact on how you are perceived.

However, we are not simply talking about the reliability of the pension fund. This is about you. Make sure that you are aware of how other, softer factors affect peoples’ perception of your reliability. Your behaviours and actions are key here.

Perceptions of reliability are often linked to simple things, like how quickly you respond to an email. Make sure you don’t forget the basics.

Intimacy

Intimacy is about getting closer and understanding your client on an emotional level, so that you can have an open and honest discussion. It’s about ensuring that, for example, an employer can say ‘I feel comfortable discussing my company’s financial pressures with her and how this effects our pension scheme.’

It is easy to miss intimacy and to simply be perceived as a technician; to immerse yourself in the facts and figures. This can be a mistake. Pensions are a highly emotive business that go well beyond logic. Your decisions and recommendations affect how people live. To trust you, people need to see that you recognise this.

All pension professionals, but notably Professional Trustees, are required to challenge decisions, negotiate and influence. It is much easier to persuade and influence if you have an emotional connection; if you have built a relationship with the employer. Your advice is more likely to be listened to and acted upon if employers feel you understand their business, the other pressures they face, and what they are trying to achieve.

Self-Orientation

Self-Orientation is about demonstrating your motives. It is about providing members and employers with the confidence that you have their interests at heart. Ensuring that, for example, a member can say ‘I can trust that he cares about my interests and is committed to ensuring the scheme will support me and my family when we need it most.’

Be friendly and conversational. Listen and respond to the concerns of members, employees and other trustees. Be interested. Make the employers’ and members’ concerns your concerns. Ensure the members, in particular, know you are there to protect their interests.

So, do you feel you put the trust in trustee?


A generation ago, pensions communication was a relatively simple business. Until 1988, employers could make membership of their occupational scheme a condition of employment, so there was little need to promote the benefits of membership. The scheme itself was likely to be a final salary arrangement. Members had no need to consider investment strategies, decumulation options or retirement dates. The point of retirement would be rigidly defined and would reflect the (then legal) mandatory retirement age. 


All major decisions would be determined by the scheme’s rules, and the nature of a Defined Benefit (DB) pension promise left many members to assume that all they needed do was wait for their retirement age for a pension to be provided. Perhaps the only major choice would be whether to exercise a commutation option. 

However, a supposedly simpler age still generated problems as a consequence of inadequate communication. Until 1977, married women had the option of paying National Insurance contributions at a reduced rate on the understanding that they would not accrue the State pension in their own right but would be able to claim a State pension based on 60% of their husband’s contribution history once both had reached State Pension Age. The full implications of exercising this option were not adequately understood, and in recent years a generation of women have reached retirement age with inadequate pension provision without being aware of the consequences of a decision made decades previously. Better communication would have avoided this.

Today’s workplace pension schemes are heavily dependent on effective communications as members need to be able to make informed decisions throughout their period of membership.

Although automatic enrolment now sees employees joining schemes by default, membership has, for the last thirty years, been voluntary, and new members must be provided with information which will allow them to decide if membership is in their best interests. Within the private sector the scheme will almost certainly be a Defined Contribution (DC) arrangement. Although the significant majority of members will remain invested in the scheme’s default fund throughout their membership, some will wish to consider alternatives, and these too must be adequately described in order to permit an informed choice. Finally, from their mid-fifties, members will consider decumulation options, and today decumulation need not necessarily be at the point of retirement. This is surely the most important aspect of modern pensions communications.

Members need to understand the different options available to them.

They need to understand the consequences of decumulation, such as the effect of the Money Purchase Annual Allowance, and they need to be aware of the risks posed by pensions scams.

The Government understood all too well that the groundbreaking reforms of Freedom and Choice required a major communications initiative to ensure that they could operate in a satisfactory manner. The launch of Pension Wise, and its forthcoming incorporation into a single financial guidance body, shows that effective pensions communication is vital if members are to achieve satisfactory retirement outcomes.

In an era where employees are likely to accrue retirement benefits with a range of different employers, keeping track of past pensions is increasingly difficult. The pensions dashboard is a bold solution that will use modern technology to allow members to trace a lifetime’s pension accrual and to make informed decisions about how best to use what they have saved.

Workplace pension provision has never been more complex than it is today.

Effective communication is vital if the current system is to serve members in an effective manner. Finding effective solutions presents a major challenge for today’s pensions professionals. It is a challenge which is addressed at some length in this month’s Pensions Aspects, and we hope you enjoy the ideas that we present here.


By Tim Middleton – PMI Technical Consultant


Thirty years ago, providing information to members about their accrued rights was a simple matter. In an era where Defined Benefit (DB) coverage was the norm, schemes were required to provide details only under specific circumstances, such as leaving service, the submission of a transfer request or imminent retirement. Then – as now – there was no statutory requirement for DB members to be provided with an annual benefit statement.


This was not perceived as a problem, as there was no incentive for schemes to try and improve levels of member engagement. Providing the benefit promise was the responsibility of the trustees alone and required no active role on the part of the member. Apart from anything else, until 1988, employers could make membership of the occupational scheme a condition of employment, and so members were required to accrue a benefit even (for whatever reason) they might not have wished to do so.

Another constraint on promoting member engagement was technological. In an era before the internet, providing information for members inevitably meant sending out paper documents. The costs arising from drafting, printing and posting documents made this process laborious and expensive. With little obvious benefit to the scheme in conducting such an exercise, it was obvious that many did not bother.

Today’s environment could not be more difficult. Today’s member is likely to belong to a Defined Contribution (DC) arrangement. He or she may have joined as a consequence of auto enrolment; active consent to join may not have been given, but the right to withdraw applies at any time. Crucially with a DC scheme, effective member engagement is absolutely necessary if members are to appreciate the true value of their benefit and ultimately achieve the goal of a satisfactory retirement outcome.

The onus lies with trustees and manager to ensure that members properly appreciate the value of scheme membership. Whilst the statutory requirements to provide an annual Benefit Statement and Statutory Money Purchase Illustration have been in place for many years, a communications revolution has arisen via the internet.

Online access to pension scheme information allows members to check – in real time – current fund values. They can make fund switches, review scheme rules and consider transfer and decumulation options. It may be possible to model the impact of changes to contribution rates or of bringing forward or deferring decumulation. Online information is extremely empowering for members and plays a vital role in promoting member satisfaction. For DC schemes, this is a crucially important consideration.

It is therefore surprising to learn that according to recent research as many as a third of employers sponsoring DC schemes have not provided online access to members. PwC established that younger members in particular consider the option to manage pension savings online is particularly important. Failing to provide access to a form of communication which younger people consider the norm is a serious obstacle to effective member engagement.

Auto enrolment has been one of the great success stories in the pensions industry in recent years.

Whilst PwC’s research suggests that employers are prepared to make the necessary financial commitment required to improve employee engagement with pension saving, there is for many a lack of clarity as to how this might best be achieved. Many lack an understanding of the associated technology and the benefits it can bring.

Bringing so many new employees into pension saving, when competition for scant employee financial resources has been so intense, has been a significant success. It would be a terrible failure if this success were to be compromised by a myopic approach to the importance of successful member engagement. Auto enrolment has been one of the great success stories in the pensions industry in recent years.

As is always the case with pensions, a vision for the longer term rather than a short-term fix is absolutely necessary.


By Tim Middleton – PMI Technical Consultant


Technology is the key to our financial futures, whether we offer savings products or services to pensions, or are one of the 14 million pensions savers in the UK. We can all benefit from technology, even if we don’t know it yet. But before we can get there, we have two knotty problems to solve. The first is to make it easier for people to save for retirement; the second is to make it possible for providers to operate in the market efficiently and effectively.


We have considerable financial vulnerability in the UK. 60% of adults have savings of less than £5,000. 30% have no private pension and will rely on the State for income when they retire. In today’s terms, that means living on c£8,000 a year, roughly half of what it takes to have a moderate lifestyle. In addition, £400 million pots have ‘lost’ their rightful owners, and around £1 billion might have been scammed from scheme members.

People do not trust the pensions industry and unfortunately, we don’t always do our utmost to change that perception.

It’s not obvious, but pension providers are financially vulnerable too. Inefficiency and high operating costs, coupled with a lack of perceived incentive to invest in the industry leads to an unintentional loss of value for everyone. There are estimates that the UK pensions industry is up to 30% more expensive (or less efficient), than elsewhere in Europe. This will be a major concern post Brexit, as it will affect competitiveness. Many administrators still rely on paper files and manual processing for a few really complex individual cases and sometimes for whole schemes. I am always disappointed when I hear administrators say that it is not cost effective to automate some calculations and processes, and decide instead to wait until a calculation is needed and do it manually. In turn they risk getting it wrong or taking a long time.

Poor quality of data and a dependence on legacy systems cost a fortune to maintain and consumes resources that could be used to optimise the way we do things. We also face an increasing squeeze on margins through charge caps and price competition. Sometimes we respond to that by subtly reducing the services, thereby perpetuating a cycle of low expectations, low trust, low savings, and increasing inefficiency.

We must do things differently and technology will help us get there, but how?

Some providers have already adopted robotics and biometrics for certain processes. Robotics is using a machine to do exactly the same thing as a human, but faster and more consistently. Robotics can help join the dots between clunky legacy systems, giving them a new lease of life, and avoiding significant replacement costs for now. Meanwhile, biometrics can help with member identification and can reduce member hassle with benefit claims. In other industries, artificial intelligence is already replacing roles that demand routine logical decisions, and in financial services machine learning is already helping people with pension decisions and savings nudges. Open banking has laid the groundwork for sharing data and switching providers. A similar concept of ‘open pensions’ could revolutionise the way we transfer and aggregate pension funds at the bulk or individual level.

The pensions dashboard is the biggest opportunity we have to kick-start pensions technology, through add-on apps and platforms, chosen by individuals or schemes, that will allow people to model and explore options and ultimately carry out transactions. Technology will help integrate pensions with mainstream saving and expenditure, and will bring pensions into the sunlight. Financial wellbeing isn’t just about the state of your bank account but must also include pension saving. People need to be able to see their whole financial world at a glance and be able to make sensible decisions without having to pay for a highly skilled and expensive, as well as rare, financial adviser.

People are perfectly capable of making complex decisions and choices if they are able to see clear, unambiguous and focused information at the right time.

Technology that merely replaces human processing will help reduce some costs, but without a quality sea change, will do little to build public trust in pensions. We must address the poor data issue and consider better processing. Dare I say it, we must simplify pension benefits themselves. Simplifying pension benefit bases is a magic bullet that everyone seems to ignore. We say it is too difficult, but this is not true. We tend to equate simplification with loss of value for members. It needn’t be, but the standardisation we see tends to come with PPF entry and this colours our view. We need to think in terms of benefit equivalence and fair value replacement, a concept well practised with incentive exercises, chiefly modifications like PIE ‘balanced deals’. We hide behind statutory increases and GMP equalisation as a block to simplification, but we can significantly simplify today even allowing for statutory barriers.

I see a communications revolution coming. Not just because of the pensions dashboard, which since it was mooted has been a catalyst for change, but also because of initiatives like simplified benefit statements and using video to tell stories about how pension saving helps society, and to explain in very simple language the options and choices at the right time for each individual. This will help make pension saving more meaningful, and I take my hat off to those schemes and consultants who are really thinking outside of the box.

Robotics advice has been slow to take off, with some commentators suggesting it might not always give the right answer. However, we need to realise that millions of people need some help and that help, which does not lie or mislead, is vastly superior to no help at all. With the expected growth in modelling apps and with some hope that future financial guidance will be seen as ‘help’ and not ‘advice’, technology will be able to dispel the mystery and bring pensions alive for most of the population. Roboadvice or some combination of robot and human guidance is part of the technology landscape. DC and DB consolidation will also rely on good technology, but many players are focused on the same old systems, processes and data, just relying on assets under management, and volume processing for efficiency. This misses the point and also misses the tremendous opportunity from technology to solve our issues of inefficiency.

Operational inefficiency needs investment in technology, but we must ensure we make changes that help pension systems (internal and external), to talk to one another and not just go for local solutions in isolation.

We need common data and transfer protocols, standards-based assurance, data integrity, and government leadership to make this happen.


By Margaret Snowdon – PASA


Whilst I have been working in financial services for over 20 years, when I became Managing Director of Origo at the beginning of this year, one of the first things I did was to tour the industry to get a fresh perspective and hear what various stakeholders believe is important for the industry and the UK consumer.


What was extremely encouraging to see was the focus on customers/members and helping them achieve good outcomes. What I was somewhat surprised to learn, however, was how a number of key processes are still subject to manual processing.

Given the functionality and capabilities that lie within the phones we all carry around in our pockets, and how fast and easy online access to bank accounts are forming consumers’ expectations of what is the norm, for pensions administration processes to be carried out using paper-based systems mixed with large, complex spreadsheets seems incongruous to the way we now live our lives and run our businesses. Add to this the fact that pension provider systems and processes are increasingly under greater scrutiny by Government, which is very much focused on the consumer experience, and there is a clear need for change.

There are numerous reasons why processes are lagging technology: time, resource and money sum up the key ones.

All companies, no matter how large, have finite amounts of each, and the considerable amount of legislation and regulation with which the pension industry has had to deal with over the past few years have focused priorities. Add to that mix the legacy systems companies have acquired over the years, along with the need to make a business case for improving back-office administration against more pressing issues, and it is understandable that in some areas industry processes have fallen behind the available technology.

So, how do we address this? Let’s take as an example bulk pension transfers; the transferring of a pension scheme’s members (in full or part), from one provider or administrator to another.

To carry out a bulk transfer, considerable data and information on payments and entitlements has to be collated, monitored, and passed between the ceding and receiving parties.

When using manual paperbased transfer processes, they are open to a range of disadvantages:

+ Delays in the sending and receiving of data by organisations and the member
+ Issues around accuracy of transfer information, as changes continue to occur during the transfer process
+ Formatting errors
+ Delays and costs of manually updating information
+ Keying errors
+ Communication breakdowns between scheme and providers
+ Contacting and dealing with the ‘right’ contacts at counterparties to progress the transfer
+ Data transfer issues
+ Data security issues
+ Out-of-market issues.

Automating bulk transfers enables processes to be better controlled and the majority of the issues listed above to be resolved. Most importantly, it can also lower costs as well as the risks for all parties, particularly the scheme members.

Automating the bulk transfers process enables faster switching between ceding and receiving parties and can deliver:

+ Faster, member-centric service
+ Transparent, trackable process
+ Secure and reliable transfer and communications between transferring parties
+ Consistency and integrity of data (as all transfer parties work from the same data)
+ Savings for providers and administrators in terms of time and money
+ Common approach across the industry
+ Significantly reduced costs per transfer as well as overall costs
+ Better member outcomes.

It also helps employers to save considerable time and resource commitment.

How it works

Origo has been operating a bulk transfers service since 2015. This is how it works.

First, a trust framework is signed up to by transferring counterparties, with each party aware of its obligations and rights. This framework enables the receiving party (for contractbased schemes), to collect consent from each member on behalf of the ceding party at the point of application.

This does away with paperwork inefficiencies which occur between organisations and individuals, ultimately slowing down the transfer.

This framework is the open Common Declaration Standard now managed by Criterion. The system defines, and all parties agree, ahead of any transfer, the information that is absolutely critical and common to effect the transfer. This removes any uncertainty and confusion, and saves administrator time.

Formatted CSV files are then uploaded to Options Transfers, a secure online service, avoiding data security risks that emailing CSV files can cause, critical under GDPR.

Changes and updates to the information can then be conducted through one secure point by each transferring counterparty. This avoids confusion as to which file, or information about a particular member or even an entire scheme, is the latest and most up-to-date. The changes are recorded for future auditing purposes, as well as being automatically notified to the other transferring party, with any action required in order to progress the transfer quickly flagged. Another advantage of using a secure bulk transfers hub is that contact information of the teams and individuals responsible for administering the transfer can be added, speeding up relevant communications. For example, notes can be sent securely, helping to ensure all transferring parties are kept abreast of any anomalies in an efficient and fully auditable way.

Finally, automation includes secure, automated monitoring and co-ordination, as well as prompting of actions, and full MI and audit trail for review and compliance requirements.

There are some very clear wins here. The scheme member experiences a safer, faster, customer-focused service. The schemes and administrators have a faster, less labourintensive and therefore less expensive process, with a significantly reduced possibility of error, and which is trackable and auditable.

This means that not only is the process more efficient and cost effective, but providers can better communicate with the member where they are in the process. For the new scheme taking on the business, that level of service and member attention can help cement the member’s confidence that the switch is in their best interests.

By providing a better service to members, automating bulk transfers also gives a clear message from the industry to Government around improving the consumer experience, as well as enhancing individual companies’ reputations in the industry.

And this is just one of the reasons that I joined Origo – to be at the forefront of positive change in the industry.

By automating transfers through Origo’s Options Bulk Transfers service, we are able to help the schemes, trustees, and administrators to create greater efficiencies, reduce their costs, and deliver better outcomes for members. I see that as a very positive step in the right direction for all concerned.


Technology is a wonderful thing when it works, but when it doesn’t it becomes painful. What role does technology have to play in pensions administration? A major part is the obvious answer. Examples put forward by many providers, consultants and communication specialists will sing the praises of technology, however there is a but coming…


The focus on technology in the pensions media, and on providers’ websites, has been on the value adding side of pensions. We have seen Amazon Alexa being used to provide fund values; a nice gimmick. We have augmented reality with images being scanned to reveal videos about your pension. And then there is gamification; people wearing strange looking face masks that take them into a virtual world where they can see what their projected pension will buy them in the future. A change in contribution rate could change the cup of tea to a glass of fizz, or the Mini to a Lamborghini.

This is the sexy, exciting side of technology and pensions but what about the back office? Pensions administration is about maintaining member records, calculating benefits and paying them out or transferring them somewhere else to be paid out. What role does technology have here? Blockchain has been touted as the future for pensions administration but its adoption has been virtually non-existent. Perhaps it isn’t suited to the relatively small number of transactions schemes and providers do in the traditional sense. It may only really take off in much larger scale operations, for insurers, investment houses or when/ if we see the consolidator schemes emerge.

What is happening which is more useful to administration is the use of common standards.

This is key in data exchange, whether it is for the now possibly defunct pensions dashboard, or, for example, to de-risking modelling tools, or from Auto-Enrolment assessment software. Being able to transmit data between pensions administration platforms and supporting systems is not new, it has been desirable for a long time. But now it is happening under common standards.

Alongside data transmission, we have seen data analysis and cleanse tools come on in leaps and bounds.

By firstly having clean and accurate data, we can then make use of the fancier tools the industry is excited about. Clean data lends itself to technological developments. The use of Artificial Intelligence (AI) or robots, is already creeping into administration. Why have workflow driven administration when you can have robotics doing all the hard bits for you?

The use of tools to understand big data also helps pension administration. Schemes are keen to understand the data to help engage and communicate with members better, i.e. segmenting members and being able to personalise messages to them. For administrators it helps with planning from resource allocation through to meeting training needs of the teams.

And, because I had a cheap dig at Alexa, I do believe it has a role to play in pensions. We may see its use in administration teams, replacing online scheme bibles as a source of scheme specific knowledge: “Alexa, what are the rules for… scheme from ABC Before 2008, who are now active in the Defined Contribution section?”


By Lesley Carline – PMI President

PMI President