Defined benefit (DB) pension schemes were set up with a fairly straightforward primary aim – to provide their members with an income in retirement for life. However, DB pensions have become anything but simple, as the regulatory environment has shifted, and the economic and demographic landscape has evolved.

Increasing life expectancy means that members rely on their DB pensions for longer, whilst low interest rates make DB pensions much more valuable. Meanwhile, pension freedoms provide increased flexibility but introduce a new dilemma and open the door to scams.

The task employers and trustees face to educate and inform members has never been more challenging.

The art of the possible

The good news is that the industry is responding and rising to the task. By embracing technology and engaging with communications specialists, the way in which schemes engage with their members is being transformed for the better.

It was recently reported that member engagement rates increased to between 30% and 40% when members were provided with online, real-time access to their scheme benefits, compared to the industry average engagement rate of around 10% (Source: Buck). A tripling or quadrupling of the level of member engagement really demonstrates the value of such services.

The advent of new categories for member communications at the major industry awards is further testament to the importance now placed on such innovations.

Schemes can now provide an array of services to their members. Some schemes have their own websites, providing members with:

• • Access to information on scheme benefits and the options they have about when and what form they can take their benefits in.
  • Important scheme documents like the scheme’s accounts, statement of investment principles and summary funding statement.
  • Scheme booklets and member guides, along with references to external sources of information and guidance.
  • Secure portals which provide online access to personal information and allow updates to be made – for example, amending nominations for death benefits.

Leonardo are a shining example of just how much can be done, providing three separate websites – one for its multi-award-winning DC offering, FuturePlanner, and one for each of its £1bn plus Electronics and Helicopters DB schemes. The DB sites even have an online modeller, allowing members to estimate their future pension at retirement, and to see the impact of retiring at different ages and taking different amounts of cash.

Large schemes like those operated by Leonardo can do this because they have the scale and resources to provide these things to their members in a cost-effective way. Unfortunately, that is not true of all. Whilst employers and trustees all want to do the best they can for their members, cost pressures often determine what is delivered in practice.

Member comms on a shoestring

Around 80% of private sector DB schemes have fewer than 1,000 members and lack the scale to ever run efficiently and effectively – just meeting the ever-increasing compliance burden can lead to running costs exceeding £1,000 per member every year, compared to under £200 for the largest schemes.

As a result, members of many DB schemes tend to receive just one communication a year – possibly a letter through their door, which might get a fleeting glance, before being tucked away in a draw and forgotten. The only way for these members to find out more or to engage with their benefits, is by writing to the scheme’s administrator.

However, the pressure upon schemes to do more is increasing, not only from within the industry, but from the members themselves. A recent survey found that 47 per cent of respondents would welcome more support on what options are available to them, with just 21 per cent believing that they already have an adequate level of support (Source: Hymans Robertson).

Stoneport view

With access to the right information and support, members are better equipped to guard against pension scams and to make sound financial decisions for themselves.

Stoneport aims to bring together 100 smaller DB schemes and then to leverage its scale and use technology to provide the ‘best in class’ member experience of a large DB scheme like one of Leonardo’s.