Consensus is growing both within and outside of the pension world that clearness and transparency about complex pension schemes is needed. Yet the quality of communication between funds and participants and pensioners is often criticised. Have pension funds and insurers not yet found the best way to communicate, or is it simply impossible to grab the attention of the average participant for such a complicated subject? Or do the critics possibly have an outmoded view of what communication is about?
We easily refer to “the pension world” as one homogeneous group, but within that world there are huge differences – for example, between schemes for a whole industry, or between specific companies. But also the kind of sector and the level of complexity of a particular scheme can produce differences. Looking at the funds themselves, there are also huge differences to be seen, especially in size, professionalism and strength.
In the area of communication, I believe that for many years most pension funds have harboured sincere intentions to inform their participants and pensioners as best as possible about their pension scheme. However, it is far from easy to put those intentions into effective practice.
Without focusing blame on the many smaller funds, it can be stated that the bigger funds especially have invested a lot in professionalism and media lately to improve their communication with clients. They also invest a great deal in client research. The more a fund knows about the expectations, the level of knowledge and the information needs of its participants, the better it can reach them with tailor-made messages.
Communication, as the bigger funds have discovered, is not about ‘one-way-traffic’. Effective communication starts with listening and observing. It is only when a participant really feels that he or she is a client of a specific fund, that the foundation is laid for effective communication.
Sharing knowledge and experience is also most important. Although substantial progress has already been achieved on this front, there is still much to be done. The bigger funds especially are aware of that and see further improvements in communication as a continuous process. They know the challenges that lie ahead and do not need to be urged by law to press on.
But the Dutch legislator intends to encourage all pension funds to have their client communication in order. To achieve that, it is important that existing knowledge and experience is shared as much as possible with funds which are lagging in the development of a proper communication policy. Fortunately that is easier to realise within the world of pension funds compared with commercial operations, as funds in the Netherlands are not competitors. Branch organisations like VB, Opf and UVB (industry-wide, company and professionals pension funds) can, and partly already do play an important stimulating role in this process.
When thinking of pension communication the focus is generally only on the communication between fund and participant or pensioner. However, it is recommended that attention is also paid to the exchanges between fund and employer too. All participants have an employer and naturally if they have questions about their pension scheme they will initially consult their own organisation.
For instance, employees might seek answers from the HR department or the department dealing with salary records. When the company official does not demonstrate much knowledge of the pension scheme either, that wouldn’t improve the confidence of the participant in his pension scheme. Therefore, it is wise for pension funds to put enough effort in informing employers and also to facilitate them to carry out a part of the information task themselves.
A good example of combining forces is the current process of harmonisation of the annual statements of pension rights, which each Dutch pension fund sends to its participants. The differences between the various statements are considerable. The representative organisations for pension funds VB, Opf, UVB, the Association of Insurers and the Consumers’ Union, work close together to create a universal model for a renewed annual statement. It was not easy to get this process on track as every fund wanted to have a statement which was tailor-made for its own participants. That is perfectly understandable and seems to be very client-friendly.
However, the issue is that all funds ought to be interchangeable for each participant. And there we see an antithesis. Most of the participants and their partners have, in the course of their career, built up pension rights at several funds and insurers. The ultimate challenge is to present each participant a series of annual statements which are fully comparable. Only then can he or she beable to calculate the total of built-up pension rights.
The cooperation and exchange of knowledge and experience with the annual statements could be an interesting start for further cooperation within the pension world.
It has to be admitted, however, that reaching everyone is impossible. Even on the concept of what is effective communication, I have the strong impression that those who call for it do not have a clear view on it themselves. Or it must be something like: everyone should know and understand everything about his or her pension scheme.
If that is the goal it will never be reached. No matter how much effort is put into communication, one should always be aware that you can’t reach everybody. Pension is not and never will be a top-of-mind topic for everyone. Recent research in the Netherlands proved once more that civilians are getting tired of making choices as a result of recent changes in the care system, disability law and pension system. This should never be an excuse to pay less attention, but on the other hand set realistic goals.
By the regulator stating that the new pension law is going to force pension funds to communicate properly with their participants, the suggestion is that the current situation is really bad. For a number of funds that might certainly be the case, but it is regrettable that the impression was created that the pension sector as a whole has up till now neglected its communication efforts.
Even worse, the regulator’s message could be seen as an implication that pension funds purposely withhold information. And that is absolutely unfair and incorrect. In reality a growing number of funds invest substantially in professional communication with their participants and pensioners. That includes proper research after the effects of communication.
It is not by chance that it is just the bigger funds that lead the way. Through their size and economy of scale they have more possibilities, including a professional staff. Besides they also have the majority of pensioners and participants in the Netherlands as clients. The challenge lies in sharing the existing knowledge and experience within the pension world. The new pension law will certainly stimulate the other funds to make a step forward.
Alfred Kool is a former director of corporate communications at PGGM, and is now managing partner Kool Corporate Communications