Joe Anderson discusses the importance of audience when it comes to explaining pension options.
As someone who works in the pensions industry, it's easy to forget how complex pensions actually are. That's why it doesn't hurt to put ourselves in the shoes of a member from time to time.
Let's look at what might go through the mind of a member coming up to retirement.
"I received my retirement pack through the letterbox today.
Once I'd recovered from the effort of picking it up from the doormat (wow, it's heavy), I had a read of it. I had no idea that I would have so much to think about.
If I've got this right, I need to choose whether I want a full pension or a reduced pension plus a lump sum, which is tax-free. The tax-free lump sum sounds good. But I can choose to take a lower lump sum if I don't want the maximum. How do I decide how much I need?
It also says that I can choose to transfer my pension somewhere else if I want.
But it also says that if I do want to transfer my pension somewhere else and it's worth more than GBP 30,000 I have to have independent financial advice. That sounds expensive.
Finally, I've got decisions to make about my AVCs. When I started paying AVCs I thought they would simply give me more pension when I retire. It seems I was wrong.
I've actually got another six options. I can choose to:
- take my AVCs as a lump sum instead of giving up some of my pension
- leave them where they are if I don't want to take them now
- transfer them somewhere else
- buy an annuity (which I think is another name for a pension)
- take them all as a lump sum with some of it tax-free and some of it taxed
- take small lump sums whenever I want until it runs out
If I want to, I can choose a mixture of some of the above options.
I really wasn't expecting this to be such a minefield and I don't think I can decide this on my own. And I've not even looked at the various option forms and checklists I've been sent and have to complete before I can get my pension.
I've been given some information and contact details for something called Pension Wise and the Money Advice Service but I can also speak to my administrator who sent me the letter. Maybe they can tell me what I should do...?"
Much of the information a member receives at retirement is now required by legislation or driven by best practice. This is simply an unavoidable by-product of members having many more options to choose from at retirement (which, by the way, is a good thing).
As administrators, we must communicate information clearly and consistently to allow members to make informed life decisions. That's a huge responsibility and one we can't take lightly.
We also must strike the right balance between helping members understand what they have received from us but not cross the line into providing advice.
My boss once put a very simple idea to me - put a picture of a typical member on your wall and to look at it to remind yourself who you are communicating with.
Depending on the communication, this can be a pensioner happily tending to her garden or an active member working for a client. Whatever the image, it really does help when considering how to successfully communicate. Sometimes, the best ideas are the simplest.
Written by Joe Anderson, Client Relationship Manager, Trafalgar House Pensions Administration Ltd.
