A flurry of announcements from DWP last week confirmed, among other things, that the forthcoming pensions Bill will contain the legislative basis for the move to a flat-rate basic state pension. We have always argued for this and welcome this development, as it will bring to an end the system of means tested retirement income benefits and the fiendishly complex State Second Pension and its forebears. It will also create certainty around state-provided retirement income, providing a clear platform to save further.
However, for anyone who has read the papers supporting the new architecture, it could be argued that we may stand in danger of replacing one complexity with another. A whole new jargon of phrases such as “Foundation Amount” is emerging, with quite complex formulae being required for anyone to work out what their ACTUAL state pension will be – it will still be linked to NI history – and these calculations will be beyond the ability of many, I would suggest.
And a big uncertainty is around the treatment of those with long periods of contracted-out employment. The vital factors for these calculations are, significantly in my view, yet to be disclosed, but there seems little doubt that the intention is that these groups will receive a lower state pension. The argument for this is likely to be that they paid a lower rate of National Insurance when contracted out, which is true. However, they also took their pension liabilities off the government balance sheet to some extent and the rebates towards the end of the scheme were arguably inadequate to compensate for the investment risk being carried. That risk was, and is, considerable, and government will need to be careful not to give the impression that doing the bidding of past governments of the day in taking the decision to contract out, does not result in a financial “kicking” later.
A new report published this week by the London Assembly’s Transport Committee, Airport Capacity in London, has suggested that Britain’s aviation needs could be met without the building of any new runways. Rather, the Davies Commission – the investigative body charged with setting out the future of Britain’s aviation policy, due to report in 2015 – should look at “whether better use of existing airport capacity could be an intelligent, cost-effective alternative to building new airports or runways,” according to Transport Committee Chair Caroline Pidgeon. Read More »
The Department for Work and Pensions (DWP) has issued the snappily-titled paper “Automatic Transfers: Consolidating Pension Savings”. The idea behind this is to avoid the build-up of small, poor value pension “pots” which was always likely as a by-product of automatic enrolment into pension saving. Small pots limit retirement income choices and value, and are easily lost and forgotten. I have been active in helping the industry work towards solutions to this problem. If left unaddressed, DWP estimated that 50 million small dormant pots would have been created by 2050, with 12 million of these under £2000 in value.
The idea of “pot follows member” has been around for a while, but this is now confirmed as the direction of policy travel, rather than an “aggregator” model. The paper is short on detail in many areas, with much remaining “to be set out in regulations”, which themselves will need to be consulted on, but the permissive framework will be set out in the upcoming Pensions Bill. All pension pots under £10,000 and in a Defined Contribution (DC) type scheme will, from a specified date in the future, be automatically transferred to the new employer’s scheme when an employee changes job. This will lead to an estimated 1 million transfers a year taking place, or just under 20,000 each week. This is a huge increase on current volumes. A preference is expressed within the paper for an IT solution to matching members’ pension pots with their new employers, although the development of a fall-back paper based solution is also envisaged. If the pensions industry does not undertake to build such a system itself, DWP will construct it and back-charge the industry.
Whilst I very much hope the industry will do this communally rather than waiting for the DWP to do it for them (and I will be doing everything I can to help them do this), we must be very concerned about the back-stop of a DWP build. This is not to denigrate the Department, but the history of large-scale public sector IT builds is one of almost unmitigated disaster, with a few shining exceptions. If this is the preferred direction, experience tells me that we need to build a solution that is designed by, and for, the industry. Waiting for someone else to do it is likely to result in a “camel”.
The agility and responsiveness of an organization – in these days of social media- powered customer service – can be measured by its ability to respond to a customer enquiry, comment or complaint within an hour. Those clever people at the Harvard Business Review have established that businesses that respond to customer enquiries within the hour are seven times more likely to qualify a sales lead than those that contact the customer even an hour later and more than 60 times more likely than companies that wait 24 hours or longer. It is therefore surprising to learn that the same Harvard study indicates that only 37% of businesses are actually able to manage a reply with the magic hour. Read More »
The application of social media that appears to be gathering the most momentum is its use as a customer service channel. The cost efficiencies of dealing with problems using social media – monitoring customer comments on Twitter and Facebook – rather than a call centre, are compelling, especially at a time when most organisations are looking to cut operational costs . According to Ben Kay, EE’s head of digital strategy: “not only are social agents four times more efficient than telephone agents, but they also result in better Net Promoter Score ratings” (the critical metric for most customer service teams). It would appear that customers would far rather voice their complaints on social media than spend hours on hold in call centre hell, waiting to speak to a real person. The social customer service specialist, Conversocial, claims that 50% of us are already using social media for this purpose. The cost efficiencies of social customer service are also highlighted by a statistic from British Gas: according to Laura Price, the company’s social media manager, “Each view of a YouTube customer support video equates to an £80 saving on call centre costs”. Producing a simple YouTube video, explaining the solution to common customer problems, can generate massive cost savings. Read More »
A couple of weeks ago, to a fanfare of almost no publicity, the House of Lords Select Committee on Public Service and Demographic Change, Chaired by Lord Filkin, launched the Ready for Ageing? report into the preparedness of government to deal with a rapidly ageing population. As the “baby boomers” are rapidly approaching retirement, in large numbers, this gigantic social policy issue is almost upon us. The Report found government, and the wider population, far from ready, with the issues either not discussed or simply ignored. Read More »