Pensions: let’s be positive for a brighter outlook

By Sara Neidle

If the pandemic has taught us anything, it is not to make any predictions. 2020 will go down in history as a year like no other and it will impact us for many years to come. The pandemic has dominated our lives and at times we feel trapped and there is no way out. Being an optimist, I am always trying to find the positive in anything and everything that happens. Personally, the pandemic has enabled me to reassess my life goals, ambitions, and aspirations. From speaking to friends, family and colleagues, I am not alone.

On that note let’s focus on some of the positives in the pensions market. Over the past year, due to Brexit and Covid-19, it has resulted in much delay to the world of pensions. We have started to see developments of the Pensions Schemes Bill, along with the development of The Pensions Regulator’s (TPR’s) new defined benefit (DB) funding code as well as changes in GMP equalisation and much more. Putting that all aside, we have also seen how younger investors are viewing savings and in particular pensions. The pandemic has made people save more. Between April and June 2020 saw the biggest increase in household savings, with the household savings ratio, rising to 29% compared with 6.8% in the same period last year.

Research by Moneysupermarket showed that two-thirds of Brits saved an average of £586 per month in 2020 – equivalent to £7,032 over the course of the year. With the current lockdown in place that is likely to continue and as a result create better long-term saving habits. With savings rates at an all-time low, one might ask themselves where might I invest this extra cash?

Younger investors have become more investment savvy, whether that be finding new technological and innovative ways to boost their investments now or in the future. The idea around financial planning has become ever so important. There are so many resources available, which enables investor to teach themselves or develop a greater understanding around investing and saving. Could we argue that now is the prime time to plug in the importance of saving for retirement? And encourage savers to put more into pension?

Technology has dominated the past year. We are so reliant on technology; companies have needed to invest in technology in order to maintain automated online services. We have already seen the acceleration of technology, but it will be interesting to see how pension software and administrative providers work with schemes to provide more efficient and effective user-friendly technology. For this to work successfully, this needs to be presented in a way that aligns with trustees needs but also delivers the best outcome for pension scheme members. With advancements for a pensions dashboard (which has been delayed yet again), along with new and innovative pension technology providers, maybe this is an opportunity to make pensions sexy. Will Penstech be the next big thing? I am optimistic about the digitalisation of the pensions industry.

With using technology means that there is a greater risk of data breaches. Eventually when pension dashboard is set up, it will be connecting more than £52 million UK adults with over 40,000 pension providers and pension schemes. Being safe and secure for all members will be key to its success. We already saw this week NowPensions suffer a member data breach and this is likely to be a common issue unless there are more robust processes in place. I am sure we will start to see schemes take more decisive action to ensure scheme members pensions are safeguarded from such events.

In 2020, we saw the consultation requiring schemes over £5bn to address climate risk and provide public reporting in line with the TCFD framework. The deadline for large pension schemes to implement TCFD is this October. With the pension industry evolving with the times, along with COP26 summit in November, climate change will be a key driver. ESG is not new and we are likely to see an increased focus on managing climate risk effectively and ensuring it is on schemes’ regular agendas for 2021. It will all be about preparing and ensuring that schemes have a robust plan in place. No doubt this year will continue to have it challenges and with a post Brexit world, as well as GMP equalisation, and let us not forget RPI reform and the introduction of the Pension Schemes Bill, there will be much to keep us busy. I’m very optimistic about this year. So, let’s stay true to ourselves and be positive for a brighter outlook.