Praise for the government is hard to come by at the moment, but the success of auto-enrolment is something it should be congratulated for.
It means more people are paying more money into their pensions than ever before – for many it will become their largest and most important asset.
So, you would expect pension providers to keep their customers in the picture about the basics of where their money is invested, what they are paying and where it will get them to over time.
However, research shows this is not the case. A shocking 84 per cent of young savers feel their pension providers do not keep them well-informed and as many as 50 per cent of people with old pension pots cannot even name their providers.
Add to this that 60 per cent do not know how to access their old pension pots; 87 per cent do not even know what their money is being invested in; and 89 per cent do not know what fees they are being charged and the problem becomes clear.
Is there another industry where customers know so little about what they should be getting, and have so little awareness of what they are paying and to who?
So, how on earth did we get to this point?
To simplify the evolution of the industry, workplace pension providers were built to serve their business clients – a service they provide to a generally high standard.
But things begin to unravel when an employee leaves a business and the provider must then take on a different role, one in which they are required to provide direct service to an individual.
The capabilities that a business needs to serve an individual effectively in today’s world are very different to those needed to serve a fellow business, and workplace pension providers simply do not have these capabilities.
So, how do they manage to retain nearly 100 per cent of their individual clients?
Low engagement is crucial here – remember 50 per cent of individuals cannot even name their providers. People barely consider switching due to lack of awareness, and if there is no threat of switching, why should providers improve their capabilities?
In a situation a little reminiscent of Stockholm syndrome, the more the customer is ignored, the less likely they are to leave.
This leads to a lack of innovation on the part of the provider; and any dreams of slick mobile apps to help people consolidate and manage their pensions are just that.
As auto-enrolment marches on and the labour market fluidity increases, the pool of customers caught in this self-reinforcing trap grows.
So, why should things change now?
The rise of investment and banking apps is changing the relationship people have with their money. We increasingly expect services to be delivered in a clear, transparent and personalised way via smartphone apps by companies that make their customers their number one priority.