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Shortly the government will be laying the regulations for simpler annual benefits statements and legislate for a statement season. The aim of the statement season is to maximise the impact of simpler statements and stimulate greater debate amongst the public. But is a statement season the best way to achieve these aims?
Engaging or overwhelming?
Most people will end up with several pension pots over their working life. Members would receive multiple statements in a short space of time if there was a statement season where every pension provider releases a statement within the same period.
This has the potential to help members compare their pension arrangements and take a holistic view of their saving and retirement choices; but it also has the potential to overwhelm them.
“If we are talking about statements in the post, there’s plenty of evidence that some people simply don’t even open them. If people get a series of letters from different pension providers, in some cases within days or weeks of each [other], they may well feel overwhelmed and simply not engage at all,” said partner at consultancy LCP and previous minister for pensions, Sir Steve Webb.
It is already a known issue that members do not engage enough with their pension, so some have argued that a statement season won’t make people look at their statements in itself.
“The idea of people carefully collecting them and sitting down with a mug of tea to review them all together seems absurd,” said Webb.
Kate Smith, head of pensions at provider Aegon, said a statement season alone is not enough: “We’re not convinced that a pension season would lead to a change in behaviour, unless there was a very visible joint campaign by the government and providers to announce that members were about to receive their annual benefit statements and why these are so important.”
Even then, if successful, the impact of administration could overwhelm providers’ contact centres, leading to a negative impact potentially eliminating any perceived benefit of a pension season.
“Squeezing the production and delivery of mainly paper-based statements into such a short time would be challenging at the very least. It would also lead to a spike in calls to contact centres, with the potential to overwhelm them. This in turn could lead to a poor customer experience, with a negative rather than positive impact,” said Smith.
An ‘analog solution in a digital world’
Although the simpler annual benefit statement has been well received, a statement season with paper statements has been seen as regressive.
“A statement season is a real distraction and feels like an analog solution in a digital world. We are used to up-to-date online information rather than letters in the post once a year which all happen to arrive in the same month,” said Webb.
It is hoped that the statement season would work alongside the pensions dashboards, but not being completely digital from the beginning can seem like a step backwards.
“I think what the government is doing well is the pensions dashboard. If they would put all their time and energy into that instead, to make sure it's not too far away into the future, then this seems to be an unnecessary step,” said director of Cardano Insights and head of DC design for the group, Stefan Lundbergh.
Another side to consider, especially with COP26 currently underway, is the environmental impact of paper statements. “Sending a physical letter around where you have to chop down a tree, produce it, ship it to doors, [creates] a lot of extra energy for something that is equally well-delivered digitally,” said Lundbergh.
Misplaced effort?
Getting statements out during one point in the year has been predicted to put a strain on pension providers. “The consequences for pension providers are far-reaching. There are a number of production and logistical challenges of introducing a pension statement season,” said Smith.
“The obvious issue is it will mean a capacity crunch in terms of resources and member interaction. There will also be impacts on employers to supply updated information quickly to meet any legislative timetable and a significant impact on third party suppliers such as those providing mail services,” she said.
PASA, a working group tasked with considering this idea to see if it would be workable in practice and what the issues might be, released a paper in September which raised the point that a common publication date would need careful thought. It acknowledged that whichever date is chosen, there are likely to be ‘winners and losers’ among scheme administrators because of other key administration cut-off dates.
Webb believes that a statement season not only demands a lot of pension providers, but also doesn’t address the key issue: “Crucially, the only reason you need a statement season is because people have far too many pots. Yet legislation to tackle small pots is still years away.”
Do you think a statement season is a good idea? Does it have the potential to increase engagement and help members manage their pension pots?
