Ruston Smith: Working together to solve the industry's challenges

Ruston Smith is clearly passionate about pensions - a passion that has been demonstrated not just through his career as a pensions manager and trustee but also through his broader industry work, both at the Pensions and Lifetime Savings Association, the body he chaired for two years, and through his involvement in myriad industry initiatives that aim to make pensions better for members.

Indeed, this industry work was cited by many of those who voted Smith as the winner of Pensions Personality of the Year at the UK Pensions Awards 2020. He was praised for "working tirelessly to advance standards in pensions", for his "strong belief in doing the right thing" and as someone who "always goes the extra mile to secure the very best outcomes for members".

As Smith himself said when accepting the accolade: "It is such a privilege to work in an industry that has the ability to make a real positive difference to everyday people for such a large part of their lives."

Junking the jargon

Smith believes the industry is at its best when it works together - citing the project he led to produce the template for the simpler annual statement along with Eversheds Sutherland and Quietroom as a "great example of genuine collaboration" within the industry.

He says: "It makes me proud when the industry genuinely comes together, puts personal and corporate agendas to one side, and people work with others selflessly to do their best to improve stuff."

The project was taken up by the Department for Work and Pensions (DWP), which has just announced it will look to make it mandatory for auto-enrolment defined contribution (DC) schemes to use simpler statements in the future - a move that was welcomed by Smith, who hopes this is an initiative that the industry can get behind.

But Smith says the industry needs to do much more to make things simpler for members - and he is a keen advocate of embedding simple language right across saver communications.

He says one starting place could be new regulation - the language of which so often gets copied into the vocabulary used in scheme communications.

And he says the industry needs to differentiate between disclosures meant for compliance and the information intended to be included in member communications - that which matters to members and should be written in a clear and simple everyday language.

Smith says: "We need to make sure we don't inadvertently create a juggernaut of jargon that we know will get automatically transferred to governance meetings and then, to be safe on compliance, into member communications."

A technology vision

A key part of this simplification and improvement of member experience, Smith believes, will be driven by technology and the creation of an open IT infrastructure that helps savers access information quickly and safely - adding he thinks the industry needs a "vision for technology" to improve the plumbing, reduce fragmentation and create better customer experiences.

The pensions dashboard will, no doubt, be part of such a strategy and is something Smith says should provide people with greater awareness of what they have, encourage them to save more, prompt them to consider consolidating their savings as well as help them make better choices with more complete information.

But he says the industry also needs to ensure the dashboard is simple, relevant and safe - and it should be, in his view, "totally delivered for members" and not for commercial purposes.

Smith also urges the industry to develop a highly supported, safe and simple customer journey "to and through" retirement to ensure members are getting good value from their savings and making the very best choices under the pension freedoms - something he says is especially important given how fragmented people's savings are.

He says: "Even for financially savvy people, this whole area of choices at retirement is so complicated and yet the decisions that people make literally influence the quality of the life they lead - based on the income they get.

"The Financial Conduct Authority and DWP are, of course, doing a lot of work and thinking about this - including on retirement pathways - but I just wonder how much value leakage is currently created from sub-optimal choices made through a lack of information, support and the right products at the right price."

Ultimately, Smith hopes members will be able to have one place they can see not just their retirement savings but all their other savings as well to help them make such decisions, something which he acknowledges will require cross-industry and regulatory collaboration.

He says: "People will rely on their non-retirement savings and choices, such as equity release and ISAs, as much as pure retirement savings so we need to help people to have a vision of all their savings to help them manage all their income during retirement."

Responsible investing

Yet, while Smith is passionate about "junking the jargon" and making pensions simpler to understand, he is also realistic about how much we can expect from engagement with members, noting that everyday people have busy lives and many competing demands on their time as they move through life.

But he says if the industry can get to the heart of what matters most to people at these different life stages then the next step is to create a simple, relevant and engaging conversation that is genuinely two way - and he believes that responsible investment could provide an opportunity to have such conversations with members about what matters most to them, what we can realistically do about it and what we have achieved with their support.

Indeed, with regards to responsible investing, Smith says he absolutely believes it is right that pension funds, as asset owners on behalf of members, lead by example and work together collaboratively as a force for good - influencing positive change to help create a better world - and backs the pensions minister's ambition for the UK to be a global leader.

But he also warns that schemes need to be careful to avoid any unin­tended consequences of such a shift.

He says: "To make sure we don't abandon sectors and companies globally who are behind the leaders in climate change, and also lose the ability to influence them, as well delivering pension expectations and good member outcomes, we need to think carefully about how to avoid potential unintended consequences of policy proposals."

Tax relief

Like many others within the industry, Smith also believes the tax relief system is broken - and is, not only hugely expensive, but overly complicated and misunderstood. He also thinks it is a missed opportunity to incentivise the low paid, many of whom, he says, face a higher net cost of saving than the better off due to the way in which the system works.

He says: "If we want to get more people to save more then we need to incentivise them - and have a much simpler and fairer system that people are aware of and understand."

Smith believes a flat-rate system, perhaps capped at the top end, would be better for savers. He says: "My personal view would be to scrap the current system, remove the unnecessary complexity and provide a sustainable universal rate of tax relief, up to a certain limit, that applies to all those saving for retirement, particularly low earners."

Future positive

While Smith thinks change is needed in pensions - and that people, particularly the self-employed, need to save more - he is positive and confident that policy is going in the right direction.

He says: "I'm very optimistic about the future. I sense a real passion for doing the right thing and acting with pace - putting members at the heart of everything we do and delivering the member outcomes and the wellness in retirement that savers deserve. There's so much trust from savers in what we do - it's our job to do everything we can to deliver."