Challenging financial times highlight the importance of a fool proof pension experience

For most people, their pension will be the largest source of income in retirement. It is therefore crucial that they understand it, plan for it, and know where to go to get more help if they need it.

Employers may be best placed to help with this, both in terms of their day-to-day pension experience and financial education. For the current workforce, this can be a lot easier to achieve through auto-enrolment and internal communication channels.

However, this becomes much more difficult for employees who no longer work in the business.

For large employers who have significant resources to dedicate to the cause, this is much less challenging. But for those smaller employers without this luxury, this can come at the detriment to employees and members of their pension schemes.

Defined Contribution (DC) and Defined Benefit (DB) pensions master trusts could be a solution for these smaller employers, providing access to financial education supported by a high quality and efficient day-to-day member administration service.

Financial wellbeing

These are challenging financial times for many, with the spiralling cost of living, economic uncertainty and volatile financial markets making this a very real issue. Those with no savings will be seeing their money is- not going as far, those with cash savings will be aware that they are losing value in real terms as inflation remains high and those with investments are likely to be seeing any growth outstripped.

Increasing interest rates are making mortgages more expensive at a time when everything else is getting more expensive too. It is not surprising then that, according to the Money and Pensions Service, as many as 24 million adults in the UK do not feel confident managing their money.

With recent statistics from Champion Health showing that financial pressure is the top cause of stress outside of work (coming above relationships, parenting, caring responsibilities, ill health, and bereavement), this is something many employers will be very conscious of.

Employers are well placed to help their pension scheme members but may not have the resources to do that without some external support. Helping scheme members to engage with their pension, to recognise the benefits of saving into a pension and, for those lucky enough to have one, understanding how their DB/final salary pension could support them in retirement, is critical.

For some, it will be their first taste of considering their financial future, for others, it will be part of a wider financial plan. Either way, financial education for all and access to advice for those who need it underpins their financial wellbeing.

Pensions are clearly hugely important and members need to understand the type of pension they have and the options that provides but financial education should be wider than that, encompassing everything from budgeting, saving and cashflow management, to understanding what’s going on in the economy and financial markets and why that matters, right through to knowing when an ISA might be appropriate, how insurance works, the importance of getting tax reporting right, having a Will and Powers of Attorney in place and how to make the most of tax allowances and reliefs.

And it is not just about the breadth of the topics, it is about appreciating that different people want to access information in different forms. Some prefer short videos, other like more detailed written information, some prefer interactive webinars. All can be part of a comprehensive suite of materials available for members of the abrdn pensions master trust.

The importance of pension administration

In abrdn’s experience, if members of a scheme have a question, they are looking to speak to someone that will handle their enquiry from start to finish. It is providing the human touch that is so often missing.

Of course, members need support to be professional, expert, and courteous but they also want to deal with people who will own the issue and respond to agreed deadlines. The abrdn pensions master trust, which is a DB master trust, provides its members with an administration service from XPS, including an optional online service, in addition to the free financial education from abrdn financial planning.

The trust provides all members with access to a dedicated specialist team with a specific phone number and the comfort that the person they speak to will handle their query from start to finish. This is particularly important as many members are contacting their pension scheme due to milestones in their lives such as redundancy, divorce, or bereavement.

Members are also reassured that when they do call that they are not rushed off the phone, so that they can be happy they have all the information they require to make the decision they need and that at the other end of the call is an empathetic, patient and friendly voice.

Many members are also not familiar with pensions and the jargon that can go with it. The abrdn master trust communications carry the Plain English Campaign’s Crystal Mark which ensures communications with members are clear and easy to understand.

If you would like to find out more to help decide whether a master trust could help your business, please contact one of our pension solutions specialists at [email protected].

Shona Lowe & Leigh Sanderson Shona Lowe is managing director of Financial Planning at abrdn. Leigh Sanderson is solutions manager for Pensions at abrdn.

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