Education. Education. Education. Well, pensions education to be precise. For New Labour’s renowned election promise is just as applicable in the UK to pensions when it comes to the populous at large. This is the strategy overarching the newly created Pension Service which, as part of the Department of Work and Pensions (DWP), assumed responsibility for all pensions related business from the Benefits Agency in April 2002. As Ian McCartney, Minister of State for Pensions says, people find pensions hard to understand, either because of a lack of financial education and awareness or more simply they do not have access to the information they require to make the decisions that need to be taken.
It is these factors which McCartney says feed into the government’s view that in the UK “around 3m people are severely under saving for their retirement”. In addition to this, the government estimates that a further 5-10m people are saving less than current pensioners did. The reality falls short, says McCartney, of the expectation of rough comparability which people hold between income earned during a working lifetime and their retirement income. As he explains, “It is clear that information and education initiatives are necessary to support individuals and to encourage people to plan effectively for their retirement. We are committed to ensuring that people have the information they need, through as many channels as possible”.
The Pension Service aims not just to provide services for current pensioners using modern technology channels, but improve service to future pensioners, by providing up-to-date and accurate information to help people make the right decisions about saving for their retirement. Advertising itself as an impartial information site which, says McCartney is “written to appeal to the web user”, it is clear from its website, that the Pension Service is hoping to engage a broad spectrum of people in thinking about their pensions provision. Fundamentally, this encompasses all today’s and future pensioners.
Alongside a pensions glossary with links to guides and entitlements, the website’s pension guide offers information and guidance to individuals, employers and pension scheme providers on state, occupational and personal pension options (www.pensionguide.co.uk). Information on pension options for the self-employed is also given. For current pensioners, there is a pensioner’s guide detailing information on a whole range of issues from retirement pension, through to information on winter fuel payment.
As part of the education drive, the Pension Service has run over the last couple of months, a campaign to promote a number of other pension guides to help people plan for retirement which can be downloaded from the website. There are nine pensions guides in all ranging from guides on pensions options; state pensions; occupational pensions; personal pensions; pensions for the self-employed and pensions for women to contracted-out pensions; stakeholder pensions and state pensions for carers and parents. Over 2m guides have already been distributed. There is also a Pensions Scheme Registry for those people trying to track down an old pension.
As a resource for information, the service seems to cast itself in the role of a half-way house, pointing people in the right direction for their own specific needs rather then giving financial advice on pensions products such as stakeholder or going as far as recommending what kind of savings would be most appropriate.
The current advertising campaign, based on a ‘working sheepdogs’ concept, which has run since January 2001, sits with the need for an identifiable publicity campaign, says McCartney. Activity has also included TV, press advertising and direct marketing which has involved targeting specific groups that the government is particularly concerned about when it comes to retirement savings such as the young, women and the self-employed. McCartney believes that awareness has increased due to the current pension environment, yet admits that “the current environment seems to have had a negative impact on the positioning of pensions in peoples’ minds”. But this will change over time, in his view.
Supporting a network of 26 modern pension centres, The Pension Service will have a local service, delivered in partnership with organisations in the business of dealing with the needs of pensioners. Currently, 22 pension centres are open with two more expected to open this month. The centres will calculate the amount of state retirement pension and minimum income guarantee (MIG) that individuals are entitled to; pay entitlements and deal with queries by phone, post and email as well as telling people how they can access other pension-related entitlements and services. Of the 12,500 people working for the Pension Service, 7,000 work in the new pension centres, principally providing this telephone and postal-based service processing MIG and the state pension. Another 2,000 staff work in the local service network meeting with customers. As McCartney explains, “We wanted to create a Pension Service that uses a more modern way of delivering a service and which meets the differing needs of pensioners”.
Modernity in practice means a call centre set up. The centres are beginning to establish operations along these lines, but the complete call centre model won’t happen until the movement of customer cases is completed in 2004 from existing social security offices as pensions work migrates to the new Pension Service.
The eventual hope is to extend the methods of service delivery by enabling pensioners to sort out their claims and queries through e-channels such as internet and interactive digital television, thereby removing the need to visit a local office. Clearly, although the government is anticipating a certain new breed of pensioner to either have access to or be au fait with e-technology, The Pensions Service is principally accessed as a telephone based service to pensioners. This is likely to remain so. McCartney points to the fact that over two-thirds of pensioners make retirement pension claims through the teleclaims line. In addition, “where a pensioner requires a home visit, we expect to be able to provide one”.
A key task for The Pension Service will be implementation of Pension Credit, introduced in October 2003, which will replace the MIG. The government estimates that the Pension Credit will benefit around 45% of all pensioner households and the Pension Service will also bear the responsibility for ensuring maximum take-up by those entitled to it. Plans underway to make sure that take-up is high will come through a mass media advertising campaign to launch the Pension Credit. “We will also write to all pensioners not already receiving MIG to help them consider any entitlement to Pension Credit and encourage those likely to be eligible to apply”, says McCartney.
Besides assuming responsibility for successfully implementing the Pension Credit, the Pension Service also has the task of administering retirement pensions. This includes the State Earnings-Related Pension Scheme (SERPS) and State Second Pension (S2P); MIG and winter fuel payments. There are also plans afoot to make it act as a gateway to other services pensioners receive, such as housing benefit and attendance allowance. More than 400 retirement pension and MIG sections will transfer to the 26 pension centres throughout the country and supporting local service network. Alongside delivering a range of state entitlements to pensioners throughout England, Scotland and Wales, the Pension Service also provides benefits to customers in 200 countries worldwide through the Overseas Benefits Directorate from the pension centre at Tyneview Park, Newcastle which has around 2,000 people working there.
Although individual state pension forecasts have been available on request to people for a number of years, one major initiative which has been put in place is the combined pension forecast that aims to provide better pension information to individuals by including personalised information on estimates of state pension and current private/occupational pension funds on retirement.
Since October 2001, the DWP has been working with employers and pension providers to try and ensure that they can issue combined pension forecasts to their employees. “We are continuing to recruit employers and pension providers in order to build up the service so that it can be made available to as many employees and pension scheme members as possible” says McCartney.
The process is a protracted one though. To complete the entire process from recruitment to the time that the employer or pension scheme provider provides combined forecasts can take up to 18 months accounting for successful transfer of data and putting the processes and systems in place to deal with the anticipated increase in the number of forecasts issued.
It is interesting, he says, that during the combined pension forecast, one employer offered employees who had not joined the occupational pension scheme a forecast of their state pension only, subsequent to which 10% of the targeted non-members joined the company pension scheme. This illustrates the government’s own objective to achieve a split where private to state provision is 60:40. Feedback from pilot studies showed that 97% found the statements useful and around 30% went on to find out about how they could increase their provision.
Statutory illustrations for defined contribution (DC) schemes, known in the UK as ‘money purchase’ have also been introduced by the Pension Service. From April 2003 members of DC schemes will get a regular statement telling them how much income they can expect in retirement. “Such forecasts are not a requirement for defined benefit schemes”, says McCartney, “but they are accepted as good practice and many schemes already provide them”.
The Pension Service is about joining up the dots; integrating pensions services and making them more accessible, which although previously available were not provided within one dedicated service offering. All of this is core to the government’s aim to tackle pensioner poverty by encouraging people to save and therefore have financial independence in retirement. In tandem with this, the government is pursuing an initiative to get financial education onto the national curriculum. For more information on The Pension Service: