Unprecedented levels of Government borrowing, falling tax receipts, rising unemployment and benefit claims – the financial implications of the pandemic are increasingly obvious. Private and public sector pensions will not be immune from the knock-on effects.
As many as one in 10 working adults with a pension are cutting back on saving for retirement due to the turbulent economic environment brought on by Coronavirus. Due to this, there is a pressing need to reconnect people with their savings.
Defined Contribution (DC) pension plan holders may be nursing losses from the market downturn, while Defined Benefit (DB) schemes have seen the total deficit rise to £136 billion by the end of March. Every Budget in recent years has been accompanied by speculation that austerity measures would see one or more changes to pensions – the removal of the 2.5% increase triple-lock guarantee on State Pensions; the introduction of flat-rate tax relief; or the reduction of tax-free cash at retirement. Political pressure fended away changes, but some permutation of new measures are likely to make it harder for consumers and employers to provide the retirement income they would have hoped for.
What then, might help to mitigate this doom and gloom, separate to tax, policy and product changes?
Make it relevant – The dial has hardly moved on consumer understanding of pensions. Too often we talk about engagement as code for ‘listen while I educate you’. Use financial management tools like Moneyhub to enable people to see the daily usefulness and relevance of financial control and the by-products as better outcomes.
Make it interactive – Move the emphasis away from information-overload and push marketing, into the ‘learning by doing’ sphere. Financial planning doesn’t have to be gamified; but we should harness adult learning insights, understanding that money issues are often intrinsically bound to multiple other factors, such as emotional state and physical circumstances.
Make it easy – Help consumers make everyday savings easily and impulsively - swiping to save any amount, whenever possible - and ask them to bank these into their retirement.
Make it a nudge – Signpost the next best actions, guided by the financial coach in your pocket. Monitor budgets; take advantage of better offers and build up confidence and capacity to save for the long term.
Make it personal – Combine fact and emotional engagement through the hyper-personalisation of being able to see all of your financial data together and understand what it means for you, your partner or family.
The need for and the benefits of holistic financial planning have increased because of the crisis. At Moneyhub, we have already seen more people using our services; more often, and for longer. Whatever pension changes we see, the simple truth is that we still have to deal with making provision for our later life. At least we now have the technology and design skills to create more empathetic and practical tools for consumers than ever before.
Author
Vaughan Jenkins
Vaughan is an experienced Sales Director with senior industry experience in financial services, especially the life and pensions, asset management and wealth sectors. He co-authored ‘The Insurtech Book’ and has worked as an associate and consultant to a number of businesses.