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Trust matters: shaping the future of pensions administration

Exploring the five pillars of trust in the pension industry: Benevolence, Integrity, Competence, Shared Values, and Transparency

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Author: Dan Taylor, Client Director
24 May 2023

Trust matters: shaping the future of pensions administration

Like many people, I remember a time when I didn’t fully understand the value of joining a pension scheme. Early in my career, I had a wise manager who convinced me to take that crucial step. Her knowledge, experience, and genuine concern convinced me to sign on the dotted line. Why did I do it? Because I trusted her. This decision, based on trust, has since proved to be one of the best financial decisions I’ve made in my life.

This story underscores the power of trust, a force so strong that it can guide us towards making the right decision, even when we don’t have all the knowledge or information. This is precisely what we aim to foster in the pension industry: trust that aids decision-making and helps members achieve better retirement outcomes.

Our recent independent research at Trafalgar House revealed an interesting fact: trust is the second most important factor for people buying or interacting with financial products and services. Despite this, trust is a concept we rarely discuss in the pensions industry, in stark contrast to the banking sector where “trust” and “confidence” are buzzwords. It’s time for this to change. Trust is not merely a nice-to-have; it’s a crucial factor that influences our members’ decisions and actions.

So, where does the pensions industry stand in terms of trust? We conducted a survey asking the public to rate their trust on a scale of 0 to 10. Unfortunately, the result was a mediocre 5. A detailed breakdown paints a sobering picture: 9% of people have no trust at all, 17% have very little trust, a significant 45% have some trust, 25% feel a reasonable amount of trust, and just 4% say they have a lot of trust in the pensions industry.


One member’s feedback revealed a crucial sentiment:

“It seems every day there’s a new scandal about pensions. How can we trust you when there’s so much negative news?”

This perspective is emblematic of a wider view, indicating that trust in our industry is eroding. The transition from Defined Benefit (DB) to Defined Contribution (DC) schemes has shifted the risk and decision-making responsibility to members. Issues concerning scams, fraud, cyber incidents, and changes in investment markets have negatively impacted members’ perceptions.

Moreover, this lack of trust affects decision-making. 27% of people reported that a lack of trust has a negative impact on their decision-making and retirement savings. In other words, trust isn’t just a feel-good factor; it has real, tangible consequences on the financial wellbeing of members.

Building trust isn’t a simple task; it requires us to display positive behaviours against each of the five crucial pillars of trust:

  1. Benevolence: This refers to the belief that the pension scheme is genuinely acting in the best interests of its members. In the context of pensions, this can be demonstrated through proactive advice, considering individual needs when offering options, and making decisions that benefit the long-term financial health of the scheme and its members. Benevolence also involves providing education and resources to help members understand their pensions better and make informed decisions.
  2. Integrity: This pillar involves honesty, fairness, and adherence to a set of ethical principles. For pension schemes, this means transparent handling of investments, disclosing any conflicts of interest, and treating all members fairly. It also involves acting with consistency, so that members feel they can predict and rely on the scheme’s actions.
  3. Competence: This is the ability to perform duties effectively and efficiently. In pensions, competence refers to core fundamentals of administration and the ability to provide high-quality services to members. It also means staying informed about the latest trends and regulations in the pension industry and applying this knowledge for the benefit of the scheme and its members.
  4. Shared Values: Shared values are the common principles and goals that both the pension scheme and its members hold. A pension scheme can demonstrate shared values by aligning its objectives with those of its members, such as making clear its ESG commitments. It’s also about creating a sense of community where members feel they belong and are understood.
  5. Transparency: This involves clear, open communication with members about the scheme’s actions, decisions, and their impact. For pensions, this means providing regular updates, informing members about changes in regulations and their implications. Transparency also extends to being open about challenges and how they are being addressed.

Competence is reported as being the most important pillar for building trust with members. According to our survey, the most critical factors for trust-building with administration services are accuracy (93%), speed (91%), clarity (89%), self-service options (77%), and quality support (76%).


What’s most important to members

The impact of a rapidly digitising world has changed members’ perceptions and demands. An overwhelming 76% of people are now happy to go digital for their communications and interactions. This shift suggests that embracing technology will not only streamline services but also foster trust by providing efficient, transparent, and user-friendly systems. However, it’s important to remember that a digital-first approach should not alienate those who are less technologically inclined. Offering support and alternatives for those members is equally important.

Data security is another significant trust-building factor in our digital age. An overwhelming 85% of members expressed concern over the safety of their data. Ensuring robust cyber security measures, combined with transparent communication about these safeguards, is key in creating an environment of trust.

Communication is vital in the process of trust-building. Simple, clear, and timely communication about pension schemes, investment choices, and the impacts of these decisions helps members feel involved and informed, which enhances their trust in the scheme.

Public confidence in understanding and decision making

While addressing these areas, it’s crucial to remember that trust is not an overnight achievement; it is a long-term commitment that requires consistent efforts. It’s about being there for our members at every step of their journey, demonstrating honesty, integrity, and reliability at every touchpoint.

Let us not forget that at the heart of pensions lie people’s hopes for a secure future, their dreams of a comfortable retirement. Their trust in us is not just about pensions; it’s about their life after work, their financial security, and peace of mind.

The journey to rebuild trust in the pension industry may be challenging, but it is undoubtedly a worthwhile endeavour. The benefits of trust extend beyond just the industry; it contributes to financial wellbeing, boosts confidence in financial decisions, and, ultimately, ensures a more secure future for our members. As we undertake this journey, we invite all stakeholders – members, regulators, trustees, and providers – to join us in this crucial mission. After all, the future of pensions is a shared responsibility. Together, we can foster a future where trust matters.

Next article Embracing inclusivity in pensions administration: a necessity, not an option
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