This article was originally published by IFSD Glasgow.
"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.
