Why purpose, personalisation and pace must shape modern pensions firms

Jason Whyte

By Jason Whyte

It’s no secret that few people engage with their pensions. More than half of UK workers don't know the size of their pension pot. The complexity of taxation, the lack of investment transparency and the indecipherable documentation for myriad pension pots combine to deter even the most determined saver from facing up to one of life’s most important challenges.

But the anticipated launch of a government-backed pensions dashboard that will give people a single view of their retirement prospects will transform customer engagement.

As people find it easier to view their pensions, providers will have an unprecedented opportunity to engage with their customers, differentiate themselves with unique offers and build long-term relationships. To achieve all this, they need to focus on purpose, personalisation and pace.

Have a clear purpose that your customers relate to

As we emerge from the challenges of 2020, consumers are increasingly looking for brands that share their sense of purpose and values. This purpose needs to extend beyond simply offering sustainable investments. Pension firms need to demonstrate they’re investing their own money sustainably and proactively influencing diversity and good governance within the companies in which they invest. For example, Legal and General recently committed to vote against the re-election of FTSE 100 firms’ nomination committee chairs if they fail to diversify their leadership teams by 2022.

Every engagement with the customer, from social media to product documents, offers an opportunity to communicate purpose and better connect with them. Pension providers should combine primary customer research with internal and external data, including browsing habits where appropriate, to understand what their customers really care about in a way that goes far deeper than financial needs. There are many opportunities to put this into practice, but the most powerful is during onboarding. For example, when joining a new pensions scheme as a result of starting a new job, an employee will receive multiple communications updating them on the process and asking them to register with a new online portal. Communicating the purpose of the organisation in which they are now trusting their long-saved pension pot provides an immediate bond with the customer and could significantly increase the likelihood of the individual transferring their previous pots to the new provider.

Personalise your offer

Pension firms serve a heterogeneous population. The way to engage a recently auto-enrolled 22-year-old is likely going to be wildly different from a 60-year-old with multiple pots contemplating a phased retirement. For example, the former will need a good rationale as to why they shouldn’t opt out of their pension to increase their take-home salary. A simple explanation that every pound contributed could be doubled by a combination of their employer and the government can be very persuasive. On the other hand, the 60-year-old could be anything from a tech-savvy, wealthy individual looking to consolidate pots and plan a phased retirement through to someone with minimal savings needing to eke out a living to a deferred retirement date despite limited technical and financial knowledge.

Yet many providers continue to issue the same annual statements and retirement communications to all their customers. Engaging with customers takes a personalised approach to the content, channel and timing of your interactions with them. We’re helping pension providers define the target customer experience for different segments at an increasingly granular level, using rich sources of internal and third-party data. The key is to identify segments based on user need, rather than archaic demographics, and then continuously experiment, learn and refine based on observed changes in behaviour.

As a first step, think about how you might be able to drive better consumer outcomes by pre-empting ill-informed decisions, such as a withdrawal from a pension that attracts higher rate income tax. Then test the effectiveness in reducing poor decision making by pro-actively contacting individuals with educational material and tracking their response. Specific tests like these will provide clear benefits and inform investments in data infrastructure later.

Drive change at pace

The time taken to transfer a pension varies from an average of 16 days for a defined contribution pot to as much as six months for a defined benefit transfer. Consumers will experience few other transactions in their life that take that long and, as online retailers cement same- and next-day delivery as the norm, expectations will only increase for pensions. Digital first solutions that do away with manual processes altogether are a sure way to speed things up. Many pension providers are investing heavily in such transformations. This is particularly important in the workplace pension space where firms like Smart Pension, the People’s Pension and Nest are dealing with millions of customers with initially small pots. Efficiency is the key word and only through fully digitised processes can such firms turn a profit.

The pace of internal change is also a challenge in this race to digitise. Firms have rushed to implement Agile approaches that deliver change in a more collaborative, incremental and customer-focussed way. Yet many are failing to maximise the benefits of such an approach because their second line risk and other support functions haven’t transformed in parallel. Many organisations have tried to bring these functions along by simply inviting representatives to regular ‘stand-up’ meetings, but it takes a more concerted effort to build true organisational agility. Firms that have made this transition effectively have largely done away with traditional risk committees, empowering individuals to make decisions within the regular cadence of delivery.

There’s never been a better opportunity to drive growth

Purpose, personalisation and pace provide a pragmatic, proven set of principles for all pension providers to adopt. As pensions dashboards increase customer engagement, there’s never been a better opportunity to drive growth by revamping your customer experience.

An adapted version of this article was first published in FT Pensions Expert.

About the authors

Jason Whyte
Jason Whyte PA life and pensions expert

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