The art of communication
IPE asked three pension funds – in Slovakia, the Netherlands and Sweden – the same question: ‘How do you communicate with your members?’ Here are their answers:
Dusan Doliak, chief operating officer at Winterthur dss, which has assets under management of SKK4.1bn (e110m)
“Slovak legislation establishing pension trustee companies to send an annual
letter to clients in their mandatory second pillar funds and to set up and maintain a website allowing authorised access to every client.
“In this the govern- ment was adapting the existing market custom adopted by insurance companies to ensure that pension funds would not lag behind but would keep up to current standards.
“And as we implemented strong requirements from the beginning of the funds we have not
had to make any changes as a result of the EU pension directive.
“But in addition, we have introduced a card in co-operation with a major bank. A client can put his or her card, which is a special pension card but it can also be converted to be a credit card, into an ATM of this bank and using a PIN can access their account statement.
“And some second pillar funds have also introduced an SMS facility where a short message will be sent to a client’s mobile phone after certain events that can be configured have occurred, such as when each contribution is paid.
“Clients can also communicate with us; we have a call centre that they can call. We monitor every phone call and every enquiry is written down and distributed here at the head office, and people work on it. Our website has a Frequently Asked Questions function and when people ask new valid questions we add them to the list of substantial FAQs.
“The most frequent queries involve the calculation principle and what is deducted first when a contribution is paid, whether the pension administration company’s fee is taken first or whether the money is first invested and then the fee deducted, whether the deduction is made daily, weekly or monthly. And they ask social insurance-linked questions because in Slovakia it is SI Authority that collects the contributions from employers and distributes them to the trustee. So, for example, clients ask what they have to do if they are not registered with the SI Authority or if they are on maternity leave they ask how the contributions will be paid.
“But actually the website is not the preferred method of communication for most people. They would rather use an ATM or receive an SMS message. In fact, the SMS is the most popular method, being favoured by some 30% of our clients, and about 10% check an ATM on an ad hoc basis, looking at their account status every second or third month.
“The cost for us is minimal. The complete portal with direct mail, with a card and a PIN code costs about e15 per person and if they lose the cost or the PIN it’s just a marginal cost of less than 1%.”
Niklas Nordström, marketing director at KPA Pension, which has AUM of SEK42bn (e4.5bn)
“The underlying issue with pension provision is that it is complicated. We provide pensions to Sweden’s local government sector and the publicly owned organisations providing services to it, and we can’t see any differences in the attitude to and knowledge about pensions between, for example, low-income hospital workers or high-income doctors.
“So it is very important to get rid of the feeling that it’s all mumbo-jumbo that people cannot understand.
“In addition, we are in a very competitive marketplace, with other pension funds, insurance companies and banks. There is a lot at stake and will be even more in the future when people will possibly be given the right to switch pension funds not only for future contributions but for their whole pension pot, their whole investment capital.
“And we feel that an ability to communicate and give people the right information is a crucial weapon in our armoury.
“We are using the internet as a tool and have set up what we call the private pension office which allows members to log in and access all the information concerning them – for, example how long they have been working, for which employer and how much they have in their pension account. It also allows them to calculate the impact on their pension of retiring in so many years or extending their working life.
“The legal obligation on information is that for private pension savings we have to send information on how much is in a member’s account and what we have taken out in fees, and for occupational pension fund members, which are the majority of our clients, we have to do more or less the same, although not by law but as a result of the requirement set by trade unions and employers.
“But in a competitive market it is vital to learn about our members, what they think and what they require, and down the road we are going to find a way of communicating with them on an individual basis, going out to see them, doing focus groups and events. Previously pension funds had a single way of communicating with all of their clients but now we see the need for diversity. Our members have different issues, different family situations so we need to talk to them in different ways, ways that address their priorities.
“And I see that we will increasingly have to communicate with those who are collecting their pensions. The market has traditionally lost interest in people when they retire but this will have to change. They live a considerable number of years after retirement, have quite a good living standard, are probably going to travel and save money for their grandchildren. So we need to communicate better with them and get them interested in, for example, private savings that are not pensions. And if their pension is not as high as they want we must find ways to, for example, allow them to unlock the equity in their homes.”
Jaap Maassen, director of pensions at ABP which has AUM of e200bn
“W e have three forms of communication: the standard written approach with letters, brochures and so on; a well developed call centre that has been in operation for a decade which employs more than 75 well-trained, full-time staff that can answer 90% of the questions asked; and then the internet.
“I think that the internet is particularly suitable to illustrate the consequences of our flexible retirement scheme. In a pensions letter one can give only one or two scenarios but via our online calculator, for example, we can show individuals what would be the consequences of bringing forward or postponing their retirement date and of making additional voluntary contributions.
“There are a number of particular issues in the Netherlands. One is the question of advice versus informed choice: on the one hand one wants to advise people but on the other there are legal risks in doing so. We tend to provide people with informed choice rather than saying that they should do this or that.
“Another issue is that under the new financial assessment framework we are required to inform people about indexation. Previously, they tended to think that it was a guaranteed right but now all pension funds are required to state specifically that indexation is conditional on the solvency ratio. The government has come up with a standard wording for the indexation promise which we use in our pensions letter that tells people about the build-up of their entitlement and so on.
“Indeed, apart from individual member-specific questions like ‘when do I get my pension?’ the most frequently asked questions to our call centres are about indexation. We are happy to point out that if the current trends on the asset management side and – more importantly – the rise interest rates continue, we will be able to index fully for the next year or so.
“And the last major issue is that we have to persuade the younger generation to become and stay a member of a pension fund – that pension funds based on collectivity and solidarity perform better, and that these are not ideological statements but that they deliver. For example, if somebody had been investing in ABP over the past 12 years you would have an average annual return of 8.2%. What insurance company has been able to generate that sort of return through individual arrangements?
“The young are a target group and we have to get that important point across. We do it through our newsletter and we organise sessions with younger people. Nevertheless, people tend only to think of their pension when they are close to retirement or when they start to consider early retirement.
“We had a significant pension review last year when the government more or less abolished early retirement for most active participants, and I was surprised that although this generated hundreds of questions they represented a very small proportion of our 2.3m members. It was similar when in 2004 we moved from final earnings to average career earnings. So although we have had some big changes over recent years, I think that this reflects the fact that people have a fundamental trust in the system.”