Regulators compel pension schemes to disclose information to members. But we can do better than respond with long governance documents.
Few people run a bath, light some candles and relax with a Statement of Investment Principles. Few people stay up too late, or miss their stops, because they’re engrossed in an Implementation Statement. Nobody would be thrilled to find a Chair’s Statement at the bottom of their Christmas stocking. They’re just not that gripping a read.
So why are we using them to give members essential information?
The notion comes, like most notions do, from a good place. Most people don’t realise their pension money is invested (whether as the assets of a defined benefit scheme, or the pots of a defined contribution one). They don’t understand where the money goes, what it does, what impact it’s having or why that matters. In the same way, many don’t understand who trustees are or what they do.
With a bit of extra knowledge, the thinking goes, they’d feel more engaged and more confident, and therefore better placed to get a good outcome.
So pension people like me (and probably you if you’ve read this far) look for ways to tell the story, in order to build the engagement and confidence we’re talking about. Our eyes land on the documents we have to produce, like SIPs and statements, and those become our vehicles. It’s perfectly logical. But it is right?
Governance documents are designed for people ‘in the know’
They give trustees, consultants, asset managers and other pension pros lots of clarity, and fulfil a really important governance function as a result. But they’re not built for members, and they won’t give members much clarity at all – at least, not without a big rethink.
Reinventing our technical documents as member-facing documents is a major undertaking. We analysed the front page of an investment consultant’s standard SIP and found 21 terms on it that we thought would need explaining to a member. There were only 348 words on the page. That means 1 in 16 of the words on that page would be unintelligible to the average person. They may as well have been written in Nepalese.
One option is just to get rid of those terms. But if we did would it still be compliant? Another would be to define each term. But if we did that, wouldn’t we end up making the documents even harder to read? Let’s say each definition added an extra 100 words. Across the SIP we looked at, that’d mean 44,100 extra words on top of the 6000 we started with. That would take the average person about four hours to read. It’s the same word count as For Your Eyes Only by Ian Fleming, only with much longer words, and no car chases.
The regulations say that trustees must publish SIPs and other documents on a website so that they can be found and read by both scheme members and interested members of the general public. But being found and read is one thing, and being understood and enjoyed is another. They weren’t built for that purpose – and in our view, they’re not fit for it. A member shouldn’t have to read them, any more than a homeowner needs to get to grips with the manual for their boiler. That’s only useful to the engineer. The rest of us just want hot water.
There’s a better way
It’s to do what we should have done in the first place: create purpose-built communication that’s designed to work for members. Start with them, what matters to them, what they know already and what they need to know, and work from there.
We could begin somewhere basic: a guide to how we invest. Like the ‘quick start guide’ that sits alongside the full manual, this would give readers a quick hit of useful, usable, enjoyable and engaging content. Then once we’ve established it works, we could move on to something more ambitious. That doesn’t have to mean expensive. In fact, we could make a virtue out of something low-fi.
We live our lives on screen at the moment. I bet you didn’t print this article off to read it. I bet the internet is where you hold your meetings and catch up with your friends too. It might be where you go to exercise too, or to learn.
Imagine the SIP, the Implementation Statement, the Chair’s Statement, brought to life in conversation on a series of Zoom meetings. On one side, the experts; on the other, the people who need their expertise. The experts would be able to bring some much-needed humanity and authenticity to the conversation. The members would be able to ask questions, challenge assumptions and contribute ideas. We’d still need to produce the regulatory documents, but we wouldn’t be asking as much of them.
It feels like an idea whose time has come
We’ve all become used to seeing journalists ask questions of the Prime Minister from their back bedrooms, filmed on laptop or phone cameras. Whole BBC dramas have been commissioned, filmed and broadcast in lockdown, shot in actors’ houses by their family members. There’s just no need for big budgets, high production values or complex filming logistics any more. The bar is lower – and it’s liberating.
As George Bernard Shaw said:
The single biggest problem in communication is the illusion that it has taken place.
Let’s think about that the next time we publish a governance document – however good – and imagine our engagement work is done.