BLOG: It’s time to bring the pensions dinosaurs into the 21st century
The pensions industry has been confusing people for decades. Long transfer times, hidden fees and jargon all contribute to an opaque and confusing system which drives public apathy towards one of the most important financial products we will ever have.
Auto-enrolment has been a huge step forward with more people paying more money into their pensions than ever before. But with the average person having 11 different jobs during their lifetime, old pension pots can be hard to keep track of and traditional providers are failing to provide a proper service to their customers. They make everything confusing and difficult, sending letters to addresses that customers no longer live at written in financial jargon no one understands.
Polling of 25-40 year olds shows that 50% of people with old pension pots cannot even name their providers, while 60% don’t know how to access their pots, 87% don’t know what their money is being invested in and 89% do not know what fees they are being charged.
How did it come to this? At the crux of the issue is the fact that workplace pension providers were originally set up to serve businesses, which they do to a generally high standard. Things begin to unravel when an employee leaves a business, and the provider is forced to take on a different role and provide direct service to an individual. This requires an entirely different set of capabilities, which traditional providers simply do not have.
The rise of apps
So why are people not demanding change?
Low engagement is crucial here. People barely consider switching due to lack of awareness, and if there is no threat of switching, why should providers improve the service they offer? In a situation a little reminiscent of Stockholm syndrome, the more the customer is ignored, the less likely they are to leave.
Thankfully the rise of investment and banking apps is changing the relationship people have with their money. We increasingly expect services to be delivered in a clear, transparent and personalised way by companies that make their customers their number one priority. Pensions will not be left behind.
A first step towards improvement would be the pensions bills we urgently need. Legislation – written in 1993 – states that providers have six months to complete a transfer. That simply does not work for the fast-paced culture we now live in. For reference, in 1993, Meatloaf was no. 1 and Jurassic Park was the summer blockbuster. It feels like change can’t come soon enough – the industry dinosaurs need to be dragged into the 21st century, with transfers taking no more than two weeks to complete at a maximum.
Here at Moneybox, we are committed to building a pension that is designed for the way we live today. Customers have been getting a rough deal for years and we’re not going to stop until we change this.
Ben Stanway is co-founder of Moneybox, the savings and investment app