New pension challenges need a new solution
The past few years have seen a vortex of change in workplace pensions. When we look back on the March 2014 Budget, it will be seen as a really pivotal moment for defined contribution (DC) pensions. The new freedoms it announced will have a fundamental impact on how members interact with their workplace pensions.
It came hot on the heels of auto-enrolment. Having guided the largest companies through the staging process, the focus of the pensions industry has now switched to the many smaller companies embarking on their auto-enrolment projects.
While the solutions they need may not have the same level of complexity as those of larger firms, they have far fewer resources, and the challenge has been how to support them using more online and self-service tools.
There have also been further changes to address, such as the new charges cap of 0.75% for default funds, and the abolition of active member discounts. Some schemes have had to deal with all of these changes – others with just a selection. It makes for a challenging time for anyone involved in the delivery of pensions. The changing landscape for advice means that individuals need more support than ever before with their everyday finances and longer term planning needs.
But until now, no-one has found a way through the pension regulation changes that suits both employers and employees. Employers are finding it increasingly difficult to justify the cost of financial advice for their staff as a result of regulatory change in the adviser market. At the same time, auto-enrolment means that more employees than ever will have to make decisions about their retirement finances – with little or no professional support.
Employers have told us that they are only prepared to pay one-third of what they have been for advice for their employees. Without support from technology, the combined cost and complexity to deliver what employees need is insurmountable.
We still believe there are times in everyone’s life when they will need to pay for full advice. In the past that advice was funded on a commission basis, so the impetus to ensure it was being provided at just the right time was less significant. Now advice is more difficult to source and must be paid for with up-front fees, so it is important to identify the times when receiving it is most critical.
Employers are finding it increasingly difficult to accept the cost of financial advice for their staff as a result of regulatory changes in the adviser market. But technology means that nothing has to ‘give’ and employees have everything to gain.
Against this background, Aon Employee Benefits set out to design technology that would provide the key elements of support an adviser would have given, and in an easily accessible and cost-effective way. Which is where Bigblue Touch comes in.
Through its ‘Money’ module, it enables employees to keep track of all of their personal finances and staff benefits in one portal.
It also benefits enormously from Aon’s pension offering, which is hard-wired into Bigblue Touch. That means employees are not just keeping track of their finances today, but planning for the long term and their eventual retirement.
Most of us do not have as great an understanding of our finances as we need, or would like. Keeping track of our money too often equates to a ‘shoebox of shame’ – a pile of statements from various pension schemes and bank accounts that we keep, but never refer to or use as the basis for financial planning.
In developing Bigblue Touch, the first thing we wanted to do was to create a technology platform that would enable employees to overcome the ‘shoebox of shame’, by providing access to all their important financial information in a single place.
With Bigblue Touch an employee can type in a policy number from any financial provider, for any active or closed asset, and see an up-to-date value for it. This can then be combined with live bank account details, plus other attributes such as daily valuations of property, to give a holistic view of an individual’s finances and to help them make decisions that will have an impact on their long-term wealth. There is also a financial forecasting tool that uses all the data in the system to help employees see what their retirement will look like and analyse their personal finances in detail.
Bigblue Touch technology includes around 30 triggers that flag circumstances when individuals might need professional support and guidance. The system can even help employees after they have retired. For example, if they are spending their money too quickly, in-built triggers will flag this and suggest alternative options, such as considering purchasing an annuity.
Members have more flexibility than ever before – but that means support from providers. That is what has driven our development of Bigblue Touch.
For more information and to see a demo contact us today:
t: 0844 573 0033