The pension scheme of Aberdeen-based engineering firm Wood has started offering a range of support to its defined contribution members as more schemes consider broadening member education and help. 

 

The multinational energy and materials engineering specialist made the changes following a member survey in 2021.  

 

This year, the trustees appointed Scottish Widows as the fund’s signposted income drawdown provider, while partnering with Mercer on a phone service offering guidance about the retirement options available to members. Scottish Widows and Mercer Workplace Savings manage the DC investment platform for the Wood Pension Plan. 

 

The scheme with £520m in DC and £3bn in defined benefit sections also has its own app, allowing members to view their account and perform benefit calculations among others.  

 

The trustees are not yet content with this support, however; this year, they ran another member survey, and in 2023 plan to provide webinars and pension sessions with information and guidance to members.  

 

Double whammy for DC scheme members 

 

Nearly 90% of the Wood DC membership are invested in the scheme’s default funds. In the year to June 2022, the growth element of the default reduced by 8%, while the retirement phase investments decreased by 4.5%, a picture that will look similar for many schemes as both stock markets and bonds took a dip. 

 

DC members, along with everyone else, are also experiencing the ongoing effects of inflation, devaluing not only their incomes but also their pension savings and contributions. 

 

Heidi Allan, head of financial wellbeing at consulting firm LCP, says she has seen an increase in pension schemes considering wider financial wellbeing support for members over the last few months, such as financial education, broadening communication, financial coaching and, in some cases, advice. 

  

Financial education is typically funded by the employer – or by a master trust as part of their running costs – but Allan says it is important for schemes to make use of the education and support offered by the pension provider, which often comes for free.   

  

Financial education is becoming more mainstream, both through online and onsite content delivery.   

 

“We are seeing more traction in the coaching and guidance offerings with new entrants in this market in the last couple of years,” she explains. 

 

The benefits of financial guidance could be huge. “If organisations offer good holistic financial education and information, supported by guidance and coaching then the pool of individuals that actually require personal financial advice is reduced,” says Allan. 

  

Advice as part of the support offering – where a personalised recommendation for action is given – remains the exception. Though signposting is starting to be considered by some, this is not the norm. 

 

So what can trustees do if they want to offer more support but are unsure how to go about it? Education and wider communications are a good place to start, says Allan. This can include signposting existing support from internal benefits and the wider sphere such as the government’s Moneyhelper service.   

 

“If trustees are unsure of what their members need and would value, the best thing to do is ask. Starting with a simple member survey can provide really valuable insights that can be used to shape strategy,” she adds. “Whilst some companies have ‘survey fatigue’ following the pandemic and change of working practices, these can be a useful way of gauging how employees and members are feeling and what would be valued.” 

 

 

DC schemes have started to offer members a greater range of support when making retirement decisions, agrees Sackers partner Helen Ball, saying it is not uncommon now for trustees to signpost members to master trusts which are able to provide drawdown options or offer them access to guidance or even advice.     

 

This could be a natural development given the growth in DC pot sizes and member numbers, she suggests. 

 

And it will likely continue. “We can expect this area of the industry to develop over the next couple of years,” Ball says. 

 

This is partly because policymakers are showing more interest – there has been an inquiry into pension freedoms by the Work and Pensions Committee, and the government has been consulting on bringing in ‘retirement pathways' for trust-based schemes, to mirror the investment pathways that were introduced to personal pension schemes in early 2021. 

  

Modelling tools and websites, together with generic member communications about retirement options are very common already, she says, but these simply tend to spell out what HMRC allows by way of pension choices.  

 

“They don’t always focus on member or scheme-specific issues around tax protections or more detailed implications resulting from transfers out, such as loss of protection for minimum pension ages,” she notes.   

 

 

For trustees that want to provide help to members, there are legal boundaries to consider, Ball adds.  

 

“Trustees need to be clear where their responsibilities start and end, both under the trust deed and rules and under trust law,” she says  

 

It can be easy to miss potential risks if members are signposted to a solution and trustees are not aware that they might be considered responsible for the decisions that members make as a result, warns Ball.  

 

“It would be unwise to assume that the trustees have no responsibility for the decisions that members could make.” 

 

Heidi Allan

Georgina Stewart