How to deliver the ‘guidance guarantee’ to pension investors as they approach retirement is a burning issue. Most of the debate seems to focus on providing a one-off guidance session shortly before retirement.
I cannot help thinking this is the wrong approach. Should we not be engaging with consumers over several years and educating them about their options rather than trying to address in a single session the key decisions that will have a long-term impact on their financial wellbeing?
There is a general assumption that consumers prefer face-to-face or telephone guidance when considering retirement issues. However, this view is contradicted by a study involving 2,000 UK consumers that F&TRC conducted jointly with Network Research in May. The study found that the internet is now a more popular channel among consumers for researching, buying and servicing pensions than face-to-face sessions and a long way ahead of phone-based services.
The analysis also identifies some surprising trends in preferences based on age and income.
A number of services are emerging that take a longer-term approach.
Aegon has done some really good work with its new Retiready service, although it clearly needs to be far more collegiate in the way it is using this with IFAs and their clients.
Another service that has impressed me is iAspire from Punter Southall’s Aspire to Retire division. This has been created as an online proposition that employers and trustees can provide to educate pension scheme members about their options, at the consumer’s convenience, over an extended period.
The consumer-facing service has an integrated client management system capability designed to target individuals in the five years before retirement and will provide information on all types of retirement products.
Employers can upload a spreadsheet of all employees and those over 50 will be invited to participate in the service, beginning by completing a retirement ‘wizard’. After they do this they will receive regular emails providing them with information on health, lifestyle and financial planning so they can begin to contemplate and understand their retirement options.
In addition to immediate at-retirement planning, the service includes information on post-retirement options such as equity release. Users can choose to take professional advice in executing their retirement options or follow a self-service route.
As users approach retirement they are sent a pack that allows them to consider a wide range of options and guides them to a short questionnaire. A phone service is provided for both self-service and advised clients to validate the responses they have given.
Part of this process is specifically designed to identify whether an impaired annuity will be appropriate.
The proposition has been built so that it can be white-labelled for other advice firms to use and one significant network is already using it as part of a referral process to provide specialist advice to their member firms’ clients.
Pricing is dependent on the range of services provided but at an employer/trustee level this starts from £1,500 plus VAT in year one, falling to £995 plus VAT in subsequent years. This covers all the services within iAspire including the retirement dashboard, toolkit and communication programme.
Member charges depend on whether the service chosen is on a self-select – ie guidance – or advice route. They can be paid by the employer, trustee or member.
Providing consumers with the information they need over an extended period allows for issues to be explored in far greater detail than would be practical for a single guidance guarantee session.
If government and the industry wish genuinely to see consumers make better decisions about their long-term financial future, The focus should be more on services of this type, where consumers can build their knowledge, becoming more informed and more capable of making these important decisions.
This is the sort of service we need to see more of if we are really going to achieve better customer outcomes.
Ian McKenna is director of the Finance & Technology Research Centre