DC DEBATE


Howdo we measure success in DC retirement provision?


Stuart Murphy: At a basic level, we need to track engagement levels, how many members are regularly using their online account, how many are increasing contributions and how many are consolidating previous pensions. Ensuring members are targeting the right level of retirement savings is the big challenge for the industry and we are very supportive of the PLSA retirement income targets initiative, targeting three retirement lifestyles, and also simplified pension benefit statements to help members understand what they are on track to receive in retirement. Last year we commissioned some research on


how members felt about retirement. Members often felt scared that they would make the wrong decision when approaching retirement and thought the options currently out there weren’t tailored to their specific needs, so we tried to design a personalised retirement default that was easy to understand - the ‘four pots’ catering for active years’ income, a later life pot, an inheritance pot and lastly holidays and rainy-day saving. The feedback we got was really positive, and the Financial Conduct Authority has announced that providers need to provide retirement pathways by August next year using this as an example, which is a huge development.


WE NEED TO USE


THE BEST OUTCOME


DATA TO PROVIDE PEOPLE WITH


Mark Rowlands: Ultimately, it’s aboutmember outcomes. Are people able to retire with dignity and with enough money to last themthrough the rest of their lives? We now have more than 10mpeople saving into


a pension, but it is now time to think about how we engage people with those savings. We need to


help themunderstand how much they need for when they retire, how to achieve that goal and how to convert these savings into a lifelong income stream. Technology is fundamental to being able to do this at scale, talking to people in a way that’s timely, personal and compelling to cut through all the other information they are bombarded with every day. The goal is to change peoples’ relationships with their workplace pension, for themto trust it and think of it as their money, in the same way as other savings they may have.


John Reeve: As an industry we arrogantly believe that pension saving is different from other savings and should be treated separately. It is not, and the sooner we take a holistic approach to financial decisions then the quicker we will improve the financial wellbeing and mental health of the population. During accumulation there are many other calls on an individual’s income and during decumulation they may have other forms of income on which they can rely. I suggest that the question should be, ‘how do we measure the success of financial decisions made by and on behalf of individuals?’ Success in investment matters is no longer just


about return. Social responsibility, in all of its forms, is increasingly important to people. Mental health is also important. I have certainly made decisions that will not maximise my income in retirement but will reduce the worry about my income. Financial wellbeing is fundamental to general wellbeing, but we need to look beyond purely maximising income in retirement and consider wellbeing in general. I do wonder if we should look to a measure such as the UN-supported ‘gross national happiness’ – it is real, I recommend that you Google it, it is fascinating.


Ensuring members are targeting the right level of retirement savings is the big


Samantha Chandler: Measure more key performance indicators, monitor more variables, increase the breadth of reporting and data points available. There are so many opinions on what success is. Lots of these are relevant, so we should work as an industry to track, measure and act upon what the data says. The picture will be different if we measure a single defined contribution benefit in isolation – that benefit may represent 1 per cent or 100 per cent of an individual’s retirement provision – so success can only be measured if we know more about people and the context that surrounds them. Engagement in the world of retirement options


challenge for the industry Stuart Murphy, head of DC client management, Legal & General


is a huge factor in the measurement of success, and with the range of retirement options still a very new concept, data is being collected and analysed like never before. We need to use data to provide people with the best outcome.


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