PMI - DC Pensions: Begin with the end in mind

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  • 09 mins 49 secs
Lydia Fearn, Head of DC & Financial Wellbeing, Redington, discusses what the future holds for AE pensions, how to ensure continued success, what a good scheme looks like, what the future holds for members and how to help them make good choices, how technology can help and introduction of AI.


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PRESENTER: This is PMI TV where I’m joined by Lydia Fearn, who’s the Head of DC and Financial Well-being at Redington. Lydia, good to have you with us today. So (a) what does the future hold?

LYDIA FEARN: Well, if we look at what’s been happening over the last few years, we’ve got nearly eight million people now auto-enrolled, and that’s a significant amount of people, so more people are saving in DC savings than ever before, and more than defined benefit. So really we need to continue to do the good work. We need to think about how to engage these members, and think about how can we help them through the auto-escalation that’s going to happen in the next couple of years. We know people need to contribute more. We want to keep them in it doing the good stuff they’re doing, and continue to look to help them for their future.

So it’s been a really great start, but we know the contributions are pretty low. We need to think about how can we get those higher, and how can we get people thinking about their longer-term savings as a priority, not something that they might think about maybe one day when they’re hitting maybe 50 plus. It’s got to be something that’s part of their overall budgeting for their lifestyle.

PRESENTER: So, as an industry, what do we need to do to make sure this success continues?

LYDIA FEARN: As I say, it’s things about engaging, talking to the members, and helping them really think about how their long-term savings fits in with their overall day-to-day life, I think that should really benefit them, and also talk to the employers as well and help them understand why it’s so important that their employees are contributing. That would help them on the long term for their goals, and also help their employees plan for a better future. The little things like the fact that we need to get to 8% with auto-escalation, so members will be putting in 3% but then getting that 5% uplift. So helping them understand actually don’t think about coming out right now, let’s see how your savings are growing, see how good it’s doing for you, and really get them to think about their long term savings for their future. And that can start at an early age. But I think employers, trustees can do a lot around looking at their own scheme as well as thinking about their membership.

PRESENTER: What does a good scheme look like?

LYDIA FEARN: So how you would look at a good scheme, you’d look at particularly strong governance. I think that’s really important. Having employers and trustees really looking at the scheme that they’re offering to their membership, and making sure it stacks up. So things like looking at the membership profiles, what the member’s actually doing, who’s investing in the default, who’s looking outside the default, how much are they contribution, and where geographically are they contributing, so you might get buckets of people contributing more than other areas particularly.

So really understanding that and getting a regular review for your scheme is really important. Also, talking to members and asking their opinions is quite important. You often get buckets of members that do particularly talk louder than others around pensions, possibly those ones that are coming up to retirement. But actually you need to think about the wider membership and engaging with those younger members as well. And in terms of value for money, doing regular value for money reviews. Is what you’re offering your membership really benefiting those members, and are they getting value for money as much as they can for the money they’re putting in?

So there’s a lot to be done, and a lot still to do. As well as looking after the regulatory side and making sure they comply, there’s many other things around governance that I think schemes, trustees and particularly employers need to think about going forward.

PRESENTER: How do you help members save for their futures?

LYDIA FEARN: So this is something that we really believe the employers and trustees can have a part in. And obviously there’s that slight issue around advice versus guidance, but there is still a lot around the guidance that you can definitely do. And better communications is key. This is something that in industry you talk about a lot. And we’ve talked about communications improving, and people being engaged, but actually I don’t think we’ve done as much as we should do. There’s a lot more to be done. The sort of things we think about as the EAST framework we use for communications, where it’s easy, accessible, social and timely.

So you’re doing things that people can engage with very quickly. You’re doing it so it’s something maybe online or maybe even just a form they can fill in super quick and relevant and focused. Social is the fact that many of the people will be doing it. So if you’re a person sitting there thinking I don’t know how I’m going to contribute, I need to think about my future, I’m not sure how I’m going to manage it. There’s other people like them that are doing it. It’s how do we help the people that are doing it give the advice, advice, guidance, information to other people to help them on their journey as well. And timely, it means that you need to think about when you start engaging with people around long-term savings. It’s not forefront in their mind, it’s a priority they think about later because they can park it because it’s a long time away.

So talking to them around Christmas time about summer holidays it’s just not going to work for a lot of these people. You need to think about potentially around pay review time, definitely when somebody joins a new company, and on a regular basis. And the same repetitive message is very important, because generally you need to say I think at least three times before somebody will think about acting. If you say to somebody after three, four, five times a lot of people generally start acting at that point. So making sure that your messages are short, simple but repetitive, and hopefully that should bring some more action from the membership, which is kind of what you’re trying to do.

PRESENTER: What does the future hold for members, and how can we help them make good choices?

LYDIA FEARN: Well the fact is if we do nothing, if we don’t look to the future now, people could be in a very difficult position when it comes to their retirement. Often people think oh I’ll just have to work longer, I won’t be able to retire. But that’s on the basis that they are able to work longer. Obviously ill health wouldn’t necessarily allow people to work as long as potentially they’d want to. So we do to act now to help those people to manage and plan for their futures, and at least give them an idea of where they should be heading and managing those expectations is really key. It’s not necessarily a big cruise in the sun; it’s got to be a bit more realistic. How are they going to manage their incoming and outgoing when they’re in retirement, when they don’t have the work environment that they’ve been used to.

And the through retirement piece - so when you’re transitioning from pre-retirement into retirement - that needs quite a lot more work. It’s something that people are talking a lot more about, but we need to build something ready for when these people need it. We need to encourage them to make better choices, and that might be investment choice. It might be how to draw down the money, so that through retirement piece needs to be able to transition effectively and easily from pre to post-retirement. And currently there isn’t a lot of legislation around it, and that may change in the future. This is something we need to be mindful of. And again making sure the value for money, so what people are getting through the retirement piece is actually working for them from a value perspective.

PRESENTER: How can technology help?

LYDIA FEARN: Well technology has definitely been seen more and more within the pensions industry. I think historically we were pretty slow to move with the times, and hopefully we can do more around that. We’re looking at robo advisors and how they can help. And potentially that can be a way that robo advice could be used on a regular basis with human interaction every so often. So people don’t feel like oh I have to speak to somebody if I need to do something, actually something’s there for them to be able to do it. And there’s already really intelligent software out there that actually can talk to you as if you’re a human. Obviously the understanding is much deeper than that. There’s much more that can be done and should be done, and we should be looking to other industries and other ways that people use technology to bring it into pensions to start talking to people about it in a real life environment.

PRESENTER: So artificial intelligence, perhaps this could be the answer.

LYDIA FEARN: It could potentially be a help. I don’t think it will answer everything but I think it could definitely help. If you bring that sort of technology into the robo advice, where the computer starts learning more about the person they’re speaking to, you can imagine how powerful that could become. And we look at devices like the Amazon Alexa or the Google speaker, how that can then be tied potentially into your savings, and then you can ask it simple questions. And then potentially it can learn more about you, and then you give you more information literally just talking to it. So it’s making people more aware of what they’ve got, being more emotionally connected to their longer term savings, like they are with their day to day savings. And feeling like this is my money, this is what I can do with it. I know what I’m planning for, I know what I’m going to be able to do in retirement, and this is how I’m going to work it. So technology I think will have a huge impact on this, and we should embrace it as an industry.

PRESENTER: Lydia, thank you.

LYDIA FEARN: Thank you so much.


Atlas: The considered choice of master trusts. Atlas is the trustee-led Master Trust representing the considered choice for employers who want their employees to have the financial futures they choose. Everything we do is for our members, giving them control and the confidence that their hard-earned money and their best interests are being looked after by an independent, proactive board of trustees. With an open structure to partner with the right practitioners, Atlas is supported by the people experts Capita, daily administrators of British life and the investment expertise of Schroders. Together, we ensure that no member retires on an income that’s a surprise to them.


With four decades of investment experience, Newton is one of the UK’s most prominent active managers of DC pension investments. We work closely with schemes and specialist DC consultants to ensure we fully understand the outcomes that members are looking for and are positioned to offer solutions that are tailored to meet these requirements.

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