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Consumers and the New Pension Landscape
Annual ConferenceThe True Potential Centre for the Public Understanding of Finance
Welcome
One Whitehall Place, 26 November 2015
@OUBSchool #PUFin
www.open.ac.uk/pufin
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Michelle Cracknell, Chief Executive,The Pensions Advisory Service
Session 1: What help and support do people want in relation to pension decisions?
@OUBSchool #PUFin
www.open.ac.uk/pufin
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Helping people make
proper provision for their
retirement
3
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Public policy issue
4.3 Help people to make proper
provision for their retirement
• In 2014, income from DB only
schemes is around 40% and
income from DC schemes is
around 5%. By 2060, the
pattern is reversed.
• Receiving a DC scheme amount
becomes a typical outcome for
persons reaching SPA from mid
2020s
• Post 2050, it becomes a typical
outcome for persons reaching
SPA not to receive a DB
scheme amount
Helping people with their
pensions is a public policy
issue of growing importance
with the growth in DC
provision.
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TPAS experience for half year
• Volumes up by
81% year on year,
in 6 months
83,500+ customers
(103,000 in
2014/15)
• Great start but
need to encourage
more people to
take guidance
• Need to improve
signposting; earlier
and not by provider
5
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Webchat Trigger Webchat subject
Freedom and Choice 14.27% Contract Terms & Eligibility 8.49% April - Sept
Taking Benefits 13.84% Not Specified 8.44%
Information/Quotation Request 11.28% Freedom & Choice 7.48%
Paying Contributions 9.02% Taxation 7.36%
Retirement 6.04% Retirement Planning 7.10%
Helpline Trigger Helpline subject
Freedom and Choice 18.89% Freedom & Choice 11.05% April - Sept
Taking Benefits 16.66% Taking Payments 7.60%
Retirement 12.37% Retirement Planning 6.49%
Information/Quotation Request 7.36% Decision Making 6.20%
Transfer 5.10% Taxation 5.39%
Written Trigger Written subject
Taking Benefits 19.81% Retirement Planning 20.44% April – Oct
Information/Quotation Request 15.56% Freedom & Choice Legislation 15.67%
Paying Contributions 9.71% General Legal Rights 11.89%
Transfer 8.90% SP: General 6.77%
Freedom and Choice 8.39% Contract Terms & Eligibility 6.66%
Insight into enquiries
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Step 1
Understanding what the customer has and what is
needed
Step 2
Describing the options relevant to the customer
Step 3
Decide and buy
Guidance – getting Step 1 right is critical
Regulated Financial Advice
What guidance delivers
7
• Most customers do not understand what pensions
they have and what they need to think about
• Guidance helps get people started on the journey.
• Delivered by an experienced, independent and
impartial organisation, it can take people a long
way
• BUT… it does not provide a definitive course of
action
The focus for a public service
should be to get customers
started by making sure that
Step 1 is done and done well
Current market issue is
difficult for customer to
decide and buy without
going through all 3 steps in
the regulated advice
channel
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Guidance in action
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Guidance in action
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Guidance in action
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Guidance in action
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Pensions are special!
12
Economics – important for UK PLC to get individuals to be responsible for their
retirement income, long tail on products, irrevocable decisions, later life making the
right financial decision critical.
Social - “mass market” product, “invisible product”, multiple jobs, multiple small pots,
workplace no longer suitable venue, employers less likely to want to engage with or
maintain a relationship with ex-employees, start as soon as possible.
Culture – support at key ages and events, retirement is series of events, emotional
time, triggered by traumatic life events such as divorce and death.
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Components of guidance
13
Pensions guidance
“Nudge” & “shove” to make guidance the norm
Quality
ImpartialValue
for money
More than customer satisfaction;
specialist knowledge and experience
needed to diagnose issues
In order to be a
sustainable public
service
Signposting at key
life events and age
Able to go up to advice
boundary and to be
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Final words
14
Need for a public service
Must be quality/expert, impartial and value for money
Should work closely with the industry to
deliver better customer outcomes
deliver better public outcomes
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Joanne Segars, Chief Executive,Pensions and Lifetime Savings Association
Session 2: Pensions policy and the Government’s pension agenda
@OUBSchool #PUFin
www.open.ac.uk/pufin
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JOANNE SEGARS
New times
Pensions and Lifetime Savings Association
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AUTOMATIC ENROLMENT: A PENSIONS GROWTH STORY
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
Active members ofprivate sector pensionschemes
Employers with an AEduty
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FREEDOM & CHOICE
State Pension
PropertyISAs
Work
Annuity
Cash
Bank account
Drawdown
Cash-out plan
Tradeable annuity
£1.5 trillion
(Good) value (for money)Single rate
IORP
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FREEDOM & CHOICE
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STRONG SIGNPOSTING
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Pension tax relief is money lost to the Exchequer forever. Wrong!
Changing the system will give the Exchequer more money. Wrong!
High rate tax payers benefit disproportionately in the current system. Wrong!
A single rate of relief would benefit the many at the expense of the few. Wrong!
Changing the system will make it easier and cheaper to administer pensions. Wrong!
Workplace pension schemes will continue to contribute above the statutory minimum regardless of changes to the system. Wrong!
PENSIONS TAX RELIEF – WRONG!
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Consumers and the New Pension Landscape
Annual Conference
The True Potential Centre for the
Public Understanding of Finance
THANK YOU
@OUBSchool #PUFin
www.open.ac.uk/pufin