What’s going on with the statements season?

The reasons for this lie partly in the framing of the conversation, partly in the nature of the proposal itself and what has and what has not been learnt from Sweden, where the idea originated. 

At the moment, it is clear from what the minister’s announcements to the Pensions and Lifetime Savings Association’s conference and to the Work and Pensions Committee that he strongly favours a statements season.

The minister wants occupational pension schemes to send out statements, on paper, in a short window. That might be as little as a month. There is a Department for Work and Pensions’ working group discussing this on which B&CE is represented.

The DWP should run a proper consultation in which the government’s view is clearly communicated, supported by evidence, and where the industry, consumer advocates and the wider public get a chance to have a say

Sector is prepared for the worse

Beyond that, there is nothing explaining the department’s position. There is no policy document, no impact assessment, and no evidence base. It is not a surprise that the proposal is meeting resistance, as in the absence of any firm proposal or public rationale the sector is preparing for the worst.

Schemes know that sending paper statements is expensive and that there is usually a spike in calls to contact centres shortly after statements get sent.

They see a paper statements season as likely to concentrate engagement into a short window and cause saver frustration with overwhelmed contact centres. If people do talk about pensions in the pub, it will just be to complain about how long they waited on the phone.

Evidence-based debate conducted in public would resolve a lot of this angst. The DWP should run a proper consultation in which the government’s view is clearly communicated, supported by evidence, and where the industry, consumer advocates and the wider public get a chance to have a say.

The Swedish example

It would also allow a better focus on the real lessons from Sweden where the idea originated.

In 1994, the Swedish government introduced legislation to phase out a generous, publicly funded defined benefit system and phase in a combination of notional defined contribution accounts and conventional DC.

This was less generous but also seen as more sustainable. It came with a major communications challenge around trust and public understanding.

Part of the answer to this was to send annual statements setting out what people would receive from the new notional DC and conventional DC pensions. This would arrive as an aggregated statement at the same time every year in a distinctive orange envelope, backed by a major government communications campaign.

This approach has driven much greater understanding in the Swedish pensions system, but not all of the lessons from it are transferable to UK occupational pensions.

For starters, it deals only with mandatory pensions, not occupational pensions. And it does not seek to create the same sort of engagement or decision-making, partly as the Swedish pensions system does not enable individual decision-making in the same way that the UK system does.

Lessons for the UK

As this orange envelope initiative has matured, though, we have started to see lessons that might be applied to the UK.

First, the majority of people get the orange envelope digitally, with 52 per cent getting it to a secure online mailbox and with only about one in three getting a paper copy. Digital works and it is the majority preference.

There is also a clear call to action in the communication, directing people either to the minpension.se dashboard where they can view occupational pension forecasts, as well or to the Swedish Pensions Agency website.

The Swedish Pensions Agency’s research shows that the one in three Swedes who follow up online are much better placed to understand and take decisions around their pensions than those who just rely on the statement.

In other words, now that the main job of building trust and understanding in pension reform has been achieved, the Swedish Pensions Agency is mainly using annual digital communications to drive engagement with the Swedish pensions dashboard and its own online pension information.

There are clear lessons here for the UK about how to drive initial engagement with pensions dashboards and with services provided by the Money and Pensions Service.

If this were the conversation we were having, the industry response would be much more positive.

COP26 is also making us question whether we should really be defaulting communications to paper when alternatives are available.

The public deserves a better-quality conversation about pensions engagement. It is up to the industry and the government to make sure that happens.

Tim Gosling is head of policy at B&CE, provider of The People’s Pension