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Why does the garbage man not understand his pension?

Solving the communication challenge is a key battle for improving engagement in saving for retirement.

01 Jan 2017

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“I speak to everyone in the same way, whether he is the garbage man or the president of the university”

Albert Einstein


This quote has really resonated with me of late as I find myself reading more and more pensions-related communications. Communications seems to be a “hot topic” at the moment as we try as an industry to wrap our heads around the concept of engaging members and meeting regulatory requirements. In one such pensions communication I recently came across the below phrase and thought, I wonder how this looks to someone who hasn’t spent years studying statistics?

“Stochastic modelling estimates the probable outcomes by allowing for random variations over time in one or more aspects of the projection. The random variation is based on fluctuations noted in historical data for a selected period using standard time-series techniques.”

Easy to understand? No is the obvious answer, and this explanation (I use the term lightly) is taken directly from a recent report sent to members as part of the glossary of terms to simplify matters! One of my colleagues kindly offered her services as my guinea pig on this one and promptly stated “I didn’t get a word of that from stochastic onwards.”

The point I am trying to make here is that how do we expect the general public who don’t live and breathe pensions to understand and engage with their savings when we don’t give them the chance to?

If we look a little deeper into this issue, we come to the question of how data and information is passed through the investment chain. Can we really blame IGCs, employers or trustee boards if they are not receiving clear information from their service providers? Is the data they receive genuinely in a standardised, clear and readable format that allows them to adapt this for the consumer?

Our industry has a reputation for both using jargon and its love of acronyms, catchphrases and technical terms. I came across a few amusing examples a couple of months ago in a book called ‘One Plus One Equals Three’ by Dave Trott. I see these industry misnomers on an almost daily basis yet had not considered beforehand how these weren’t really clear to non-investment buffs:

Credit really means debt;
Bailout is in fact pouring money in; and
Hedge funds are now unorthodox, leveraged and UNhedged investment tools

Getting back to the point, trustee boards must push for information that they can easily understand. Service Providers have a duty to present their clients with transparent data and after all, is this not one of the key elements in building trust among industry participants and creating an environment of good governance?

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Pat Sharman

Contact Matthijs to discuss the challenges facing the pension industry

Pat Sharman

Managing Director - UK Branch
+44 207 153 3660