Tom Selby, senior analyst at AJ Bell, comments:
“We have to be honest and say that, in the past, consumer engagement has not been good enough in the retirement market. This problem mainly existed in annuities, where insurers had little incentive to communicate well with customers because they were earning fat profits as a result of inertia.
“The pension freedoms can have a transformative impact on engagement, making retirement saving attractive to a whole new generation of people. For this to happen all parts of the industry, including regulators and Government, need to work together to remove any barriers to effective communication. Revisiting rules which force providers and advisers to send piles of documents to savers which most simply don’t take any notice of would be a good place to start.
“But we can go much further. The UKs retirement rules were shaped around a world where retirement was an event – usually the purchase of an annuity – and people received an ironically-named ‘wake up’ pack. Annuitisation is no longer the default choice for most people and yet the rules governing engagement still focus on this single point in time.
“Communications have also tended to be fairly homogenous in nature but, as the PPI report points out, people’s desire and ability to engage vary based on their personal circumstances. Technology plays an increasingly important role in the way people consume information and this trend needs to be harnessed to get more people interested in saving for the future.
“The report also touches on the issue of vulnerable customers, a vital area which deserves greater focus. Vulnerability can happen at any stage of life and in a range of different circumstances, from family bereavement to the onset of dementia. Ensuring vulnerable people are adequately protected should be a priority for policymakers and the wider industry.”