A broad remit

Laura Blows speaks to the new president of the Society of Pensions Consultants, Roger Mattingly

The SPC’s membership is so broad. How do you plan to focus the SPC’s time?

The SPC covers virtually every participant within the pensions industry, apart from the big pension funds themselves. We have a healthy relationship with many associations such as the NAPF, FCA, ABI, CBI and IMA. The SPC is meeting frequently with organisations on a regular one-to-one basis to try and understand how we are coming at issues from different angles, to make sense of the overall position. Although we are aware that it would be easy to fall in the trap of being all things to all parties and to tread on eggshells to the point of not saying anything. At the SPC we have conversations about challenging subjects and come to a conclusion with regards to what is the best message to impart to government and The Pensions Regulator (TPR) to positively influence the outcome. We seem to be getting the message across and having a say, for all the right reasons. We are not trying to be mischievous, we are trying to be constructive, positive and from a knowledgeable background, not shooting from the hip, but providing some analysis and with constructive thought. Personally what I do enjoy is putting everything into context. A Google Earth view with this, looking at the macro-economics and the demographics and member outcomes, getting a sense check for what we are doing.

What issues are the SPC focusing on? I imagine auto-enrolment is big factor?

There is a certain amount of satisfaction that auto-enrolment is going ok to date. The opt-out rates so far seem markedly lower than expected, but we must be careful of taking a snapshot as those companies that have staged to date have been very proactive and very aware of auto-enrolment. As they have been engaged participants we would expect the outcome to be positive. The real challenge is yet to come with engagement and capacity. There have been adverts and letters and marketing from the Department for Work and Pensions but there is still a considerable gap between 100 per cent awareness and the reality. That gap has to be filled. It is just one of momentum, securing confidence and handling expectations.

A lot of these challenges are to do with expecting access to advice. There is a need to make sure companies accessing advice are ok and if not, advisers do not want to say at the last minute that they do not have the capacity to help. So the need for advice needs to be pre-empted. The big crunch is in 2014 as for three months between April to June approximately 47,000 employers reach their auto-enrolment staging date. Where will they get advice? In my view TPR is doing a large amount in terms of communications to help with this. Whether this challenge is too big in magnitude, it can’t be, as auto-enrolment has to succeed. There is the conundrum of having all these challenges together, the need for a quantity of quality providers along with consultant capacity issues and post-RDR tension. There is the challenge of ensuring transparency of charging for good quality consulting. There needs to be an expectation of costs to go with this. That is being worked on. It needs benchmarking and awareness of expectations and communication. I do not think those that are involved are complacent of these challenges.

What else have you been looking at on the DC side?

We are keen to see DC be contemporary and appealing, not just because of auto-enrolment. I would like the subject of access to DC pensions to be revisited. It seems strange for someone to have a large retirement benefit but be struggling at the moment, so can’t we marry the two up in some way? But is not to be a cashpoint environment, it has to be about necessity.

I am really encouraged by the acknowledgement and awareness that there is language that people do and do not understand. There is a desire to use the language of the wider population increasingly with auto-enrolment. There is a mist that descends with the word pension. Even the most intelligent people struggle to interpret what is in front of them. My view is that is not their fault, it is the industry’s challenge to get through that mist and make it clear but that’s not easy. The industry knows there is a need to improve the brand of pensions. Clear communication is key. That is aside from engagement and education. This may be through talking about ‘futures’ instead of ‘retirement dates’. Transparency versus complexity is something we are trying to challenge, as there is such a fine line between the two. Too much communication and disclosure can end up with science and jargon, but if you are too simplistic you open yourself up to accusations of opacity.

So what are you looking at with regards to DB?

I do have an awareness that the legacy DB market may be around for decades unless we can accelerate decumulation, but that would require government intervention. A lot of big schemes will self-insure and decommission instead of going to the buyout market. That should help with capacity.

What is becoming increasingly obvious is that a holistic approach to funding is the right way to look at DB schemes. Also, the strength or weakness of the employer covenant is crucial to the investment strategy. The employer covenant may be strong now but that may change. If the employer covenant is very weak then the assumptions and investment strategy needs to be a lot more careful, without adding a lot more inappropriate risk.

What would you like to achieve during your time as president of the SPC?

One of my many bugbears is the mixed messages coming out of government. It’s a carry-over from (previous SPC president) Kevin LeGrand’s concern. For instance we are dealing with the cabinet office’s Red Tape Challenge at the same time as GMP equalisation, but I know there are efforts to limit the bureaucratic impact of GMP equalisation. We also have the government reinvigorating workplace pensions at the same time as them further diluting tax incentives and reductions of annual and lifetime allowances. So there are mixed messages and tensions.

I think having a joined-up pensions strategy is within reach but we are not there yet. There is a desire from a number of people to have that. Pensions is not the old political football it used to be, there is more of a consensus. I would be delighted if through my presidency at the SPC we can help create that as that will end up creating better outcomes for pensioners. I’m pleased with the state pension changes and that will create a positive backdrop to that objective and aspiration. I also want to get involved in improving DC. In the last 12 months we have re-named our sub-committee from ‘money purchase’ to ‘DC’ to make sure we are reflecting the current terminology. We are living in a different environment and era compared to money purchase being around in the 1970s and we need to reflect that. It’s not going to take one thing, it will be lots of little small improvements in aggregate to make a significant difference. These improvements are happening with regards to the open market option, default funds etc and we need to make sure that it is a holistic concentration on accumulation and decumulation. Finally, I would like to encourage clear communications, moving away from jargon, as it frustrates me when I have to read a benefit statement twice when I’ve been in the industry 30 years.

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