Isn't it time pensions got creative?

Written by Engage Works and Brand Biology chairman Nick Burns
24/01/17

I have had the privilege of spending the last 25 years of my career in the world of pensions, investments, employee benefits and financial advice.

Having stepped away from my role as CEO and then chairman of one of the world's largest pensions and employee benefits businesses a year ago, I now look back and ask myself, has anything really changed in those 25 years?

Of course, the market has seen a huge amount of legislative and regulatory change. Those with long enough memories will recall how sponsors of final salary pension schemes were given the opportunity to save National Insurance in the late 70s by contracting out. This created an industry of its own, with armies of people running around trying to reconcile GMPs, only to see this all effectively being scrapped some 35 years later. It will probably take another 35 years to unscramble it all.

We saw the arrival of stakeholder pensions which spectacularly flopped and then, more recently, along came auto-enrolment, so complex to administer that the minimum contributions that are finding their way into price-capped funds aren't going to make the slightest difference to someone's future retirement. Aside from the political implications, why our government didn't have the courage to instigate full compulsion with grown-up contributions that might actually make a difference is beyond me.

And now pension freedoms. A welcome flexibility in my view, yet so complicated that only those with a decent sized fund will ever be able to afford to take fee-based advice and understand what they should do with that fund. And then those same advisers will undoubtedly erode those hard-earned funds with so called "wealth management fees".

Of course, there's so much in between these changes, but if we were to really step back and look from the outside in, what we have is exactly that - an inward-looking industry.
When has it really looked outwards? When has it really considered the bigger picture? When has it really innovated?

As we enter the last three years of the first decade of the 21st century, isn't it time that the industry that so many of us have earned a good living from becomes more creative?

We are living in a world where the largest taxi company owns no vehicles; where our world's most popular media owner has no content; where our world's most valuable retailer has no inventory; where our world's largest accommodation provider owns no real estate.

What can we learn from Uber, Facebook, AliBaba and AirBnB? I would argue we can learn a huge amount. They are outward focused businesses. They invest in and applaud creativity - indeed, they insist on it.

Of course, they have their own commercial models and shareholders to satisfy, but above all they know that their survival relies upon the experience that they can provide to their customers. We are in the middle of a global experience economy and they know it. They understand that their customers expect something different. They get that delivering an amazing experience will drive loyalty. They know that customer retention will make or break them. They know they cannot stand still. They cannot look inwards. They have to keep their eyes not just on the horizon, but beyond the horizon.

So what about the pensions industry - is that really comparable?

Fund managers, administrators, actuaries, consultants, accountants, and lawyers - so many people serving an industry that has failed in many ways to look outwards; to create an experience that the very people they are serving - trustees, employers and above all employees and pension scheme members - so desperately need.

How can it be that if you stop someone in the street, whatever their age, and ask them how much they should save for later life from their weekly or monthly salary, they wouldn't have the faintest idea what you are talking about? Not much point then in asking them if they should be investing in an active or passive fund, for example.

How can it be that actuarial valuations are presented to well-meaning trustees of smaller funds every three years? Based on out-of-date information; a snapshot in time. Irrelevant.

Why can't trustees track their funding, daily, on their smart phones? Why can't they call a meeting with 24 hours’ notice and make an informed investment decision that could take risk off the table and delight their sponsor who probably hates the fact they have a historical liability hanging around their necks?

Many people up and down the country have no idea that they are heading for a change in living standards in their later years. If they knew what we all know, it would frighten them to death; and as advancements in medicine continue, our aging population, many of whom will suffer from dementia, will put a burden on the next generation that is likely to be unsustainable. It won't really affect me, but it will affect my children and their children. Future generations.

Now we could just leave that for them to figure out. Or we could, in the same way as we are trying to protect our amazing planet for future generations, do something about it. We need to get creative and fast. We need to understand what experience we need to give to people that would make them firstly start to think about their futures and then help them to take control.

We have to get people to own their futures, just as they own a smartphone, a car, a house, a decision on where to go on holiday.

We must change mind sets, but not with logic. Not with facts and figures, but with emotion.
Maybe it's time for the branding departments to get creative too. Yes, brands in financial services need to be trusted but with the destruction of trust in financial institutions since the 2008 crash, it’s time to get thinking caps on.

If Apple, Amazon, and Google carry more trust, especially from the ever-growing millennial population, then perhaps sub-brands should be created from the traditional providers of pensions and savings, new sub-brand names that create a more emotional impact; and with those brands come deep and meaningful engagement strategies that play to the heart of that brand.

I remember a well-known insurance company issuing a free umbrella with a pensions policy document - presumably for that "rainy day". At the time it seemed like a good idea. But, who wants to save for a rainy day? People I speak to dream of saving for a sunny day so they can enjoy their lives in the sunshine, so why not issue a pair of Ray Bans for every new saver?

Even better - imagine giving away a free Virtual Reality (VR) headset, that can connect to the value of someone's personal fund. Allow them to look into the future, at what life could they look forward to - will it be rainy or sunny?

If they don't fancy the rainy one, show them how they can take control and change that.
We must help people to visualise what their life could look like. Hilarious projections on reams of regulatory paperwork, issued each and every year, are meaningless nonsense. We know that's the case. We know it doesn't work, yet we continue to do the same thing, year after year.

I'd go further and say we should encourage the use of mixed reality and it must start in schools and run right through the workplace. It should be part of "learning and development" budgets - not confined to the "pensions" or "benefits” budgets.

And as MR grows in popularity, 3D avatars should be able to become trusted advisers.
So just as you can create life-size ballet dancers who help you to improve your dance skills, or personal trainers to help you create that elusive six pack, why not create your own personal financial advisor who can help you plan out your future?

This could be the way to re-engage the millions who have been disenfranchised from receiving advice post the RDR.

We have to make it easy and engaging; even fun for people to save. Give them simple voice commands they can use, link it back to their payroll if they are employed, so additional deductions can happen seamlessly.

Allow them to look at saving holistically. Allow them to include the cost of their mortgage, school fees, holidays, new pair of trainers, eating out, day-to-day stuff. Keep it dynamic, real, emotional.

If Samsung can attract people to buy their latest smartphone by giving a free VR headset, why shouldn't the pensions and saving industry?

What if traditional manufacturers of financial products became the content providers? What if they provided the regulatory protections? What if they changed their distribution strategies away from traditional markets to the social media platforms?

My children are all millennials. They typically have a dozen conversations happening at the same time across at least 4 social media platforms. Those conversations happen constantly whilst they are awake. Imagine if the pensions and savings industry got in on the act.
We should ask ourselves every day as we go about our business, "does this make a difference to the end customer". If it doesn't, then we must change it.

The regulators need to get out of their offices and they too need to get real. They must help drive this. They must drive positive change, not more rules and regulations that are often impossible to decipher, however well-meaning they are. They should be engaging with the top brains in the likes of Uber, Facebook, Twitter, Google, Amazon and ask them how the pensions and savings industry should engage the disengaged population.

The CEOs, CMOs, COOs of our industry giants should be doing the same. They must do it now. There is no time to waste. They all have a joint responsibility to our future generations, otherwise in years to come, the historians will look back and talk about the people who could have done something about this and chose not to.

Since stepping away, maybe temporarily, from the industry, I have had the privilege to engage with other businesses - nothing to do with pensions. My eyes have been opened. My mind has been opened. I have experienced the power that creativity brings. Now it's time that pensions got creative.

Nick Burns was the former CEO and Chairman of Capita Employee Benefits and is now the Chairman of Engage Works and Brand Biology

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