The UK pension landscape has undergone significant changes in recent years, driven by demographic shifts, economic pressures, and evolving pension regulations. There has been a shift from defined benefit (DB) to defined contribution (DC) pensions and the introduction of pension freedom rules and auto-enrolment.
While these changes aim to address the challenges an ageing population poses and provide greater flexibility and security for retirees, it’s crucial for individuals of all generations to understand pensions, the modifications and what they mean for them. And Aviva’s Emma Douglas, who was voted Pensions Woman of 2023, is on a mission to help all generations grasp the importance of pensions instead of waiting until they’re older. She’s also encouraging employers to be accountable for ensuring their people understand retirement.
Major Pension Roles
Douglas juggles two major roles in the pensions industry: a part-time role as chair of the Pensions and Lifetime Savings Association (PLSA), which marked its 100th anniversary in January 2023, and MD Workplace at Aviva from October 2021 to the present. She moved to Aviva from Legal and General Investment Management (LGIM), where she spent over seven years as head of defined contribution (DC). She also had previous roles at Mercer BlackRock and Threadneedle Asset Management.
Her career before Aviva was focused especially on DC, so the move to Aviva and the PLSA role widened her scope in the industry.
Poor Pension Awareness
In 2023, Douglas, worked with WPI Economics to outline what 2050 retirees can expect and how to provide support for DC savers.
The report really emphasised how little Brits know about pensions and saving for retirement. It found that 64% of UK individuals due to retire in the 2050s (who are on middle incomes between £25k and £45k per year) say they do not know how much they need to save and invest before retirement to achieve their desired retirement income level.
Furthermore, although 72% would like independent advice about retirement decisions, just 10% have taken any advice and Brits have a better understanding of football rules than retirement rules.
Pensions Not A Priority
Douglas is honest about how individuals approach pensions and doesn’t try to convince us that pensions and retirement are at the top of people’s agenda, as she admitted on LinkedIn: ‘There’s still a lot to do when it comes to helping people feel confident about planning for their retirement. Initiatives like the PLSA’s Retirement Living Standards are really useful, and we have more ideas and suggestions in our Working Lives report, but it’s still one of the biggest challenges we face as an industry.’
Sleepwalking Into Retirement
Douglas was also instrumental in driving Aviva’s Working Lives report last year, which focused on how employers are (and should be) helping employees plan for their future and retirement.
She said in the report: ‘Talking money with an employer or line manager is becoming more commonplace, with younger workers leading the way in breaking down the stigma associated with talking to the boss about money worries. One of the areas where employers can offer important support is with retirement savings. Pensions are designed to be a long-term investment, and decisions made today will echo beyond people’s working lives.
‘It is more important than ever that employers encourage their people to talk to them about money worries, and employees are given the confidence to take up any financial education their employer can offer.’
It outlined how employers can help their people with retirement planning, for example, by using the pension tracking service to find lost pensions and reframing expectations about life expectancy and retirement needs.
It showed that 43% of employees have never discussed their financial wellbeing with their employer, and younger generations are more willing to do this. But this is a significant improvement of 73% of employees in 2022.
In the report, Douglas also said that although the pension freedom legislation has given people more flexibility and choice regarding retirement savings: ‘It is desperately concerning that many savers are overwhelmed by the choices they face at retirement but are reluctant to pay for independent financial advice and are sleepwalking into retirement. The pensions industry and government must work together to support today’s retirees in making the right choices for what might be long and, hopefully, financially comfortable retirements.’
The Impact of DC Pensions
Although she didn’t hold a yearning for life in pensions, Douglas has made many efforts to highlight DC pensions and shine a light on this area. She told Professional Pensions: ‘Actually, DC can be good – it’s not got the guarantees of defined benefit (DB), but it’s got more flexibility, and if you do it right, you can still have a decent standard of living in retirement.’
Plus, DC has the added appeal or interest to some of the investment and operations sides. ‘The investment side has got so much more interesting now with all of the ESG investments and the net-zero commitments. There is also the member communication aspect – that never goes away – and the engagement challenge is always there,’ she told Professional Pensions.
Triple Defaulters
So, what else has she done since to encourage retirement discussions and open up the reality of pension planning throughout generations? Perhaps one of the many reasons Douglas was named Pensions Woman of the Year is her ability to focus on cross-generation individuals, how pensions affect them, and what they could be doing.
In accordance with auto-enrolment, she has communicated the existence of ‘triple defaulters’. These are the millions who auto-enrolled into their default pension scheme but never update their target retirement age, contributions or investment choices, or target retirement age, which could see them missing out on thousands in pension funds,
Douglas said: ‘Default strategies and settings will meet the needs of a wide range of investors – with different ages, backgrounds, and income levels – and, for many, they can be the right choice. By their very nature, default investment strategies are designed to do the ‘heavy lifting’ for you, putting the investment decisions in the hands of the experts.
‘But we also know that while defaults are essential, making small active changes to your pension, particularly increasing contribution levels, can have a significant impact.’
A Role Model
Douglas is a fearless role model for aspiring and existing female leaders. She’s proven this by committing to two significant roles at once. When asked in an interview about taking on the Aviva and PLSA roles, she admitted: ‘It’s one last big roll of the dice, so let’s go big and see what I can do in both of them. Sometimes, I think it was a lot to take on, but I’m really happy that I’ve gone for it.’
And she’s not afraid to highlight the need for and importance of female leaders and board members in pensions. She said of the diversity of PLSA: ‘It really felt a bit of a breakthrough to be doing that. And it can make a difference to thinking about women. The gender pension gap is real, and so anything we can do about that to aid people who are part-time workers, who are mainly women, is crucial.’
Author: Emma Douglas
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