Nordic Region: Time to talk about pensions
Regulatory changes have put the spotlight on how Danish pension funds are communicating with their members, writes Rachel Fixsen
Extensive changes to pensions rules forced Danish scheme members to wake up and take action earlier this year. As they flocked to providers for advice, customer advisers found themselves busier than ever.
The surge in demand for information has put the spotlight on communications. How do, and should, pension funds talk to members, and is it possible to plan for the busy times sparked by changes in the law?
New regulations regarding the early retirement system took effect in Denmark at the beginning of 2012. As a result, scheme members had to decide whether or not to have their contributions refunded.
In the same period, the pensions industry launched a joint campaign asking members to spring-clean their deferred pensions.
Changes have been made to capital, or lump-sum pensions (kapitalpension), which affect their taxation after this tax year, requiring investors to make decisions about whether to switch to a different product and when to draw-down payments.
PKA, the joint administration company for five social and healthcare sector pension funds, was one organisation dealing with a big rise in applications from members in the first half of this year. “Our experience is, however, that it is the decisions around the efterløn – the Danish early retirement system – that have caused most of the questions,” says Britt Brandum, head of member services at PKA.
Parliament will always keep communication departments at pension schemes busy, she says. “The frequent alterations in taxation of pension entitlements combined with a short implementation period, causes a lot of trouble – especially when details have still not been sorted out,” she says.
Commercial provider Nordea Life & Pension reports that it saw a huge demand for advice about the consequences of the tax reforms on pensions. “This happened, both on a proactive and a reactive level,” says Steen Michael Erichsen, CEO of the division. During this busy phase – and in order to communicate with pension customers in general – Nordea Life & Pension used all communications channels, he says. These include a call centre, direct mail, newsletters, personal advice to corporate and private customers through the branch network of parent bank Nordea, website, individual information distributed via a private customer’s home banking set-up (netpension) as well as news designed for intranets.
“New regulation does create a lot of extra work for us,” Erichsen says. “This, of course, depends on the specifics, but it often requires major changes in our IT infrastructure because they affect many customers.”
Unipension, the pensions administrator for the Architects’ Pension Fund (AP), MP Pension and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD), also saw the number of calls and e-mails from members swell.
The drill for such sudden increases involves a multi-pronged approach, explains Pernille Mølgaard Toft, head of communications: “We communicate the changes on our electronic platforms, internet and newsletters in a way that minimises the need for further information.”
As well as this, Toft adds, all Unipension employees coming into direct contact with members are trained specifically on the new rules so they are able to give good advice. “Also, with a more strategic and long-term scope, we offer our members counselling via a video link, so that member and adviser have the same screen to look at,” she says.
How does PKA cope with such a sudden demand for advice? “In general, PKA is blessed by having a simple scheme structure and in combination with effective and flexible advisory solutions – focused on web-based solutions – we can manage such increases,” says Brandum.
“But it is obvious that you are stuck with a lot of prioritising unless you accept increasing costs caused by, for example, hiring skilled staff for a short period,” she adds.
Not all pension funds experienced the spike in customer queries, though. The PensionDanmark labour market fund said the increase it saw was not large, because the pension tax changes had a limited impact on its members. For Unipension, the principles for communication with members start with getting as close to members as possible, so it can offer them the information they need.
“We believe in communicating in as accessible and attentive a way as possible, with more and more emphasis on electronic communication,” says Mølgaard Toft. “The subject matter is complex and most people’s attention span is short when it comes to pensions, so that makes it all the more important that we are precise.”
According to PKA, good communication means providing adequate, relevant information, and using the information channels that members ask for, Brandum says.
“Members must always be offered sufficient information to be able to choose and relate.”
To what extent do pension funds rely on electronic communication, and is such a medium acceptable for all members, including the elderly? PKA’s Brandum sees no conflict here. “Digital communication is definitely our tool to enhance services and communication without increasing costs,” she remarks.
Because of this, PKA focuses on digital services, individual information and tools offering a wide range of pension calculations, digital newsletters. Recently, the pensions administrator has started using social media such as Facebook. “The elderly members are the most frequent users of digital information, even Facebook,” she says.
In the last year, Unipension has relied on electronic communication, and last year became the first Danish pension fund to introduce pension counselling via webcam. Members no longer receive a print copy of their pension summary, but are required to log on to a secure website to get it. “We regularly ask our members about these things and a majority wish to receive information from us electronically,” says Mølgaard Toft.
“We have had no complaints about this.”
PFA Pension – the country’s largest commercial pensions provider with an AuM of DKK345bn (€46.3bn) – also finds customers happy with the fact nearly all communication is electronic.
“Previously, we forwarded loads of documents to our customers,” says public affairs director Thomas Torp. “Now, we communicate in an easy-to-understand way, and preferably electronically,” he says. “Being a customer with PFA has become much easier.”
PensionDanmark sees it as important to be available to customers not just during work hours, but every day, from 8am to 9pm, says director Jens-Christian Stougaard. “With modern call-centre technology, it is possible to adjust to sudden changes in demand,” he says. It uses customised e-mails to advise both members and companies, and reports a growing interest in this over the last two years.
The way Denmark’s labour market pensions system is organised, some providers have membership limited to a single industrial sector. PKA notes that its members share the same values and experience the same pensions developments and labour market demands. Such homogeneity can potentially ease mass communication.
Other providers, such as PFA, have individual members spread far more widely across sectors. “We can’t just communicate through trade journals,” says Torp. “But our size involves economies of scale, also when it comes to communication. We see size as a strength and not as a problem,” he says.
In any case, the momentum towards mergers means Danish pension providers will find themselves having to communicate with members from a broader range of industry backgrounds.
Torp says that mergers will imply specific challenges of communication, but insists economies of scale outweigh these.
Stougaard agrees: “PensionDanmark is the result of a number of mergers, which has created synergies and a more focused strategy for digitisation.”