DC and Financial Wellbeing conference

LCP’s Heidi Allan, Head of Financial Wellbeing and Carla Lakey, Head of People, led an interactive session on financial confidence and building a resilient workforce. Highlighting LCP’s annual research, Heidi revealed that nearly half (49%) of employees lack confidence in managing daily finances. This issue spans all age groups and income levels, with higher earners often feeling the financial strain more acutely. Financial pressures significantly impact employees' ability to make sound financial decisions, particularly for late-career colleagues, where 1 in 3 struggle with everyday finances and over half feel they lack control over their financial future.

Highlights from the Q&A session

Q: What are the biggest challenges you see in financial confidence amongst employees and what impact does this have on the organisation?

A: Financial confidence has declined, impacting productivity. Employees face information overload and a more challenging world, such as the rising cost of living.

Q: Have you seen differences in expectations between generations?

A: Younger employees expect support and increased awareness, while older employees with more retirement options also need assistance in making end-of-career decisions.

Q: What are some low-cost, high-impact ideas for improving retirement financial outlook?

A: Segmented sessions recorded for employees to access on their own terms and training for people leaders to support employees can be effective.

Q: How do you consider workforce demographics in supporting financial wellbeing?

A: Employers should offer a suite of benefits that allow employees to pick and choose what they need when they need it, considering that what works now may not be effective in five years.

Q: What impact does social media have on financial awareness and confidence?

A: There is so much information that people don't know what to trust. Employers, as trusted sources, have a role to play in providing reliable information.

Q: Do companies see engaged members as more expensive, and is this a barrier to good communication?

A: Engaged members planning for the future are more productive in the long run, so it is beneficial to focus on good communication.

Q: How can we scale financial education to a large business?

A: Building networks, finding the right people to promote and support frameworks, and using storytelling and industry events like Talk Money Week and Stress Awareness Month can help build momentum. The introduction of workplace champions can be a good source of signposting, so ensure you are supporting them to help others. 

LCP’s Rachel Crowther, Principal, and Nigel Dunn, Partner, led a session focusing on the key features that schemes should look out for when selecting a master trust. The session showcased LCP’s latest DC provider research, which is set out in our master trusts unpacked series and addresses provider default strategies and their broader propositions.

Key insights from this session include:

• Innovation: Master trusts are overhauling existing strategies and introducing new premium strategies, all in the pursuit of improving member outcomes.
• Responsible Investment: All master trusts are integrating Responsible Investment into their default strategies. At the end of 2024, 95% had climate integrated equity in their default.
• Private markets: Most master trusts are still in the process of building up allocations to private markets, but there is a big variation in the size, cost, and type of investments.
• Member engagement: How master trusts are addressing the engagement challenge, including the use of artificial intelligence to support member interactions.
• Post-retirement: An overview of the different approaches providers are taking to developing packaged post-retirement products.

Following presentations by Rachel and Nigel, Priti Ruparelia, Trustee Director and Head of DC at Independent Governance Group, and George Emmerson, an accredited professional trustee at Capital Cranfield joined them on stage for a panel discussion. Key issues raised by audience members were:

• Whether master trust strategies are too similar, or have more potential to be similar, as assets under management increase. 
• Thoughts on the clear dividing lines between how different master trusts are approaching strategy design.
• Panellists’ views on what the biggest barriers are to a move from own trust arrangements to a master trust.
• Considerations on any red flags when going through a master trust selection process.

You may be interested in our Master Trusts Unpacked reports:

• Default investment strategies
• Evolving propositions in a time of change

LCP’s Sam Cobley, Partner, kicked off the session by sharing his thoughts on the evolving post-retirement landscape and the need for better solutions to meet retirees' needs. He provided compelling statistics outlining how there's a growing complexity in how people access their savings. He outlined how post-retirement solutions should have a focus on customisation taking into account four key areas:

1. Renters vs home-owners – Sam referenced Steve Webb’s research and the importance of factoring in whether an individual would need to be able to have a regular and reliable income to cover rent.
2. Health – including cognitive decline which is rarely addressed in the DC context but incredibly important – members could lose their decision-making capacity after a few years in drawdown.
3. Other savings – to design a solution that is appropriate for the member, other savings need to be taken into account.
4. A spouse’s income – or lack of, is essential in understanding a member’s requirements and expected expenditures over their retirement.

Further to this, Sam touched on aligning the investment design of pre and post retirement strategies and considered the level of prudence that members should take as they enter retirement, with less prudence being more aligned with individual spending patterns in retirement – both important other factors to consider in post-retirement offerings.

After his thought-provoking insights, Sam introduced Dawn Anderson, Head of Workplace Proposition at Aviva, and Esther Hawley, Head of Retirement Proposition at Standard Life. Dawn and Esther each gave a summary of the approach they have taken with respect to the post-retirement solutions they have developed.

Sam then facilitated a dynamic Q&A session, with a range of questions having been sent in by the audience. A common theme discussed was how providing both security and flexibility remains a challenge. They both explained how effective communication, especially through digital channels, is essential to support members on their retirement journey, recognising the diversity in tech engagement across generations.