The evolution of pension provision

The evolution of pension provision

How the pensions industry is adapting to an ever-changing world, writes Sean Egan, Director – Corporate partnerships, Irish Life Assurance plc

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6th October, 2021

The pensions world has experienced a period of transformational change over the last couple of years; not just in light of the global pandemic, and how it has affected how we work, live and communicate, but also with the transposition of the EU-wide ‘IORP II’ directive, the rising role of sustainability in investments and the trend towards financial wellness.

IORP II is seen by many as the biggest change to the pensions industry in decades. Designed to introduce higher standards in pension provision and increased protection for pension plan members across Europe, the IORP II regulations will require trustees to meet some new, very particular criteria and accept an ample list of additional responsibilities with regard to how pension plans are run, how they are structured, resourced, governed and how they communicate with members.

Employers or plan sponsors will also play a role, as they will need to introduce a range of new systems, procedures and policies and ensure their trustees are well positioned to meet the new criteria.

The Pension Authority is yet to publish the final code of practice, which is expected to give a more comprehensive insight into the specifics and exact changes required, as well as clarity around how and when the regulations are expected to roll out across the country. So, in the interim, as the industry braces itself to support this change and help trustees and plan sponsors look at the many ways in which they can prepare to meet this new challenge, one big positive that has come from all of this is the emergence and increasing popularity of ‘master trusts’.

Toted as the pension of the future, master trusts are designed to allow multiple employers participate in one overarching plan operating under a single (or ‘master’) trust arrangement. The nature and scale of a master trust plan allows it to flex and evolve, so any new industry challenges can be met centrally by the master trust and its trustees.

Benefiting from economies of scale, expert governance and forward thinking, master trusts have emerged all over the world in recent years and, in many countries, have become the flagship for pension providers, meaning that any innovations or advancements being introduced are activated first in master trust plans before being made available to ‘stand-alone’ schemes. As plan sponsors look to future proof their plans, many will undoubtedly be looking to master trusts as a viable option going forward.

One of the major areas of focus under IORP II is member communications, which we at Irish Life welcome with open arms. The opportunity for employers to get more involved in this area will undoubtedly benefit members across the country to great effect.

When it comes to engaging and educating members, employer participation is invaluable because nobody knows the best way to engage an employee base, or understands their needs, wants, culture and values better than the employer themselves.

We have seen great results from plans that have genuinely concentrated on engaging their members, particularly where they have dedicated resources such as ‘pension engagement committees’ in place. So, a spotlight on this area can only benefit the members massively and we are excited to see how it progresses.

At Irish Life, member engagement has always been a major focus, so we have many insights to share. Particularly in the last couple of years, as we have learned from and adapted to the changing world of work and member engagement by embracing digital channels and means to great effect.

Our dedicated member engagement teams have reported an increase in member engagement of almost 40 per cent since they embraced all things digital and adapted their whole way of working by providing video content, webinars and virtual support sessions in place of, or in addition to the traditional supports offered. We also revamped our member pension portal, which launched in March of this year and has since seen significant increases in activity – up to 400 per cent increased engagement in some areas.

A key trend we have seen is the recent surge of interest in ‘Financial Wellbeing’, as multiple studies have established a link between financial hardship, increased stress and a poor sense of wellbeing. Which is why, at Irish Life we are now looking to take a more wholistic approach, evolving our retirement planning communications to present pensions within the wider financial wellbeing context, rather than as a standalone element.

Taking an overall financial wellness approach is more likely to engage younger people – who often wouldn’t dream of consuming content on pensions alone – while giving people of all ages a fuller picture or greater understanding of their overall financial situation, and their pension’s place within that wider context. So, it has a really positive effect all round.

Another major development we’ve seen in recent years is the escalating role sustainability is playing when it comes to investments. Green funds are seen as a must-have by many and are increasingly in demand. We discovered in recent research, however, that many consumers think green funds inevitably come with a price tag, and that many don’t want to have to choose saving the planet over their own financial outcomes.

So, it’s important for consumers to know that with Irish Life, ‘going green’ in terms of investment funds isn’t an active choice on their part – they don’t have to take a hit by selecting an expensive, specialised fund here – lots of our core funds meet high ESG (environmental, social and governance) standards.

Thanks to our investment managers in ILIM – who are currently championing sustainability and fully committed to integrating ESG factors into investments across the board – we are happy to say that we are leading the way in this area.

Irish Life Assurance plc is regulated by the Central Bank of Ireland

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