5 ways pensions should change to fit the modern world
Most parts of our lives have been revolutionised by technology and customer-first approaches, but sometimes it feels like the pensions industry has some catching up to do. Here are five features we think future-fit pensions should have.
Usable online account
Many providers offer online pension dashboards, but does anybody actually use them? Onerous log-in processes, poor design and limited online functionality add up to a pension portal that’s yet another never-clicked-on bookmark (if it makes it to bookmark status at all…)
Wouldn’t it be nice to have a pension portal that’s beautifully designed and easy to use? It would display your current pot size and your projected retirement income, and let you make payments or set up regular contributions with a few clicks. After all, it does make sense to check your retirement savings from time-to-time, so that you can see if you’re on track, and make adjustments if you need to. With PensionBee you can manage your pension in an online account to do just that, and use our app to access your real time pension balance.
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A pension in one place
If you’ve had several different jobs (and people now have an average of 11 during their careers) then you probably have several different pension pots, which makes it pretty tricky to keep track of your retirement savings. The pension system harks back to an earlier time when most people had a ‘job for life’.
In the modern world, perhaps it would help if our pension stayed with us when we moved from one employer to another?
‘Pot follows member’ was one of the proposals of former Pensions Minister Steve Webb, but it was shelved by the government last year. Current Pensions Minister Baroness Altmann has suggested that the idea will be picked up again at some point, but it’s likely to be a while before your pension will automatically follow you from job to job.
In the meantime, don’t leave your pensions lurking in dormant pots while the providers siphon off fees. It’s estimated there could be £750bn of dormant pensions by 2050.
PensionBee can locate and transfer old pensions and put them in a single, easy-to-use plan.
Less paperwork and small print
Surely we don’t still need to receive huge wads of paper through the post? Pension providers have a habit of sending hefty paperwork that’s full of small print and jargon, which means many pension holders struggle to fully understand their pension situation. We think the pensions of the future have concise, easy-to-read documents that make the important information (fees, for example) clear up front, and that don’t try to baffle customers with jargon. It saves trees, too.
So as we’ve said, we think your pension should be easily accessible online and that you shouldn’t have to wade through stacks of paperwork to find the details. And in turn, these steps should help to drive increased consumer choice and force the market to be more transparent: high-tech pensions should be low-cost pensions.
Currently, many people aren’t aware of the amount of cash that their providers are taking from their pension pots in the form of fees, as many of the old-school pension providers bury various charges in reams of paperwork. These fees can have a big impact on the size of your pot: if you’re paying an annual fee of 2%, your pension pot could be reduced by 36% when you retire, for example.*
Giving you control
Your pension is your money for retirement, and you should feel like you’re in control of it. You should be able to get the information you need about your pension, move your money to another provider if you choose, and shop around for the best annuity when you reach retirement age. Unfortunately, many people aren’t currently in that situation. Pension providers often make it difficult to get information and they charge steep exit fees if you try to move your money. Many people are also led to believe that they have to buy their annuity (their retirement income) from their pension provider, when in fact everyone has an ‘open market option’, which gives you the right to shop around for a good rate.
* Standard assumptions apply. This calculation is based on a pension pot of £20,000, and is an illustration of how much the fees may reduce your pension pot by when you reach retirement age.
As always with investments, your capital is at risk.