What can we learn from CDCs’ focus on communications?

11 Mar 2022

One of the reasons why those incredibly thirsty Formula One racing cars still attract a huge following is the transferable technology benefits to road cars. Despite only managing around six miles per gallon around the track, top name sponsors still queue up to be involved with them because they have so much to offer that could reduce wear and tear for us regular car users down the road.

Likewise, the emphasis on member communications for the coming CDC schemes will bring similar spill over to other parts of the retirement savings industry.

The draft regulations and code of practice issued this winter, by the DWP and TPR respectively, go heavy on member communications. They are desperate to avoid, at all costs, a repeat of the endowment mortgage fiasco. Those who were working back then, through the hiatus as endowments fell short against the mortgages they were covering during the 90s, will remember it wasn’t the low maturity values that were the problem, it was the fact they came as a complete surprise to so many householders. Poor communication lay behind it all.

Getting lost in translation

If the shortfalls had only been communicated earlier, then householders would have had time to allocate a small portion of savings from interest rate reductions that were feeding through from the mid-1990s – thereby topping up their savings designed to pay off the mortgage at the end of the term.

Now, even if your business is not going to go within a mile of CDCs, just stop and think how you would measure up if your firm was asked some of the searching questions that TPR will be asking applicants for a CDC licence:

Do you have staff with the skills to develop, assess and implement effective communications?
Do these individuals have enough capacity to do the work needed?
Have you appointed a clear leader with accountability for effective communications?
Do you have a plan for producing and issuing communications?
Does it set out activities for the entire year, including reviews of communications, customer engagement and reporting?
Do you have a Quality Assurance process?
Does it check that your distribution channels are accessible to your customers?
Do you actively seek and gather feedback?
How do you test that your customers have both received and understood the key messages?

With quality assurance, we can hope to break new ground. So often today savers don’t understand what they’ve got and simply put it down to financial services being complicated.

This won’t wash with CDC, as there will be no PPF style safety net to catch them, and no extra employer payments to address ‘deficits’ as we see so much in final salary pensions. It’s vital savers understand the risks and benefits that their CDC scheme will offer them.

Taking this forward

I confidently expect a growing industry of communication consultants, who will devise new levels of effective communications. Innovative ways of getting the message over. Engaging ways to test understanding. And critically, a feedback process that can flex the method, timing and level of communication to suit every individual. Only by adopting a much more tailored approach to communications will CDC meet its goal of savers reading, understanding, engaging and acting upon these key messages.

Keep an eye on what the new CDC schemes are doing, and there will be nuggets in there that you can borrow for your own business.

As the first single company CDC is set to go live this autumn for Royal Mail employees, we invited Angela Gough, Head of Corporate Pensions at the Royal Mail to talk to us about the lessons learnt on the long road to creating the UK’s first CDC pension and discuss what opportunities it creates for the whole pensions market in the future.

Joining Angela will be Madalena Cain, Head of DC Governance at AON, and Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas

by Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas.

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