What would have to be true for a Pension to be a product you would buy?
The Stone Soup Approach to Pension Plan Design
Recently, I was rereading The Third Rail: Confronting our Pension Failures – one of the bizarrely few pension plan design page-turners out there – and something struck me.
The authors, Jim Leech, at the time CEO of Ontario Teachers’ Pension Plan, and award-winning journalist Jacquie McNish, describe the proud history of Canada’s pensions, but also grim future challenges that have only gotten worse since the book was published in 2013.
The ratio of workers to retirees is still shrinking, people are increasingly living longer lives, and the pursuit of investment returns to fund the resulting gap in our pension math is growing more and more complex and expensive. Today, Statistics Canada cites only 37.5% of Canadians as even having a workplace pension plan – and these plans remain under pressure from long-term trends.
The Third Rail brings to life three case studies of efforts that were undertaken to improve plan sustainability: reforms in New Brunswick, Rhode Island and The Netherlands. But here’s what I noticed – they were all hero stories, and a happy ending was one where everyone was equally unhappy.
Brave whistle-blowers dragging challenges to light, gutsy politicians tackling an unpopular problem, dedicated negotiators achieving impossible alignment between disparate leaders, experts and academics arguing passionately about the path forward.
It makes for great reading and, no doubt, these reforms took all the struggle and glory that is portrayed; but, nowhere in these stories did anyone seem to ask pension members what they actually want and everywhere the outcome was not more value beyond endurance, but less.
There are lots of arguments for this status quo. In our system, pension members and retirees aren’t really customers; decisions are made by governments and employers. Pensions are too complex for the average person to understand. Financial literacy is pretty low overall, and we can’t be trusted to know what’s best for our future selves. The original pension promise is outdated and was frankly too generous. There is nothing to do but curtail benefits in a way that balances the sacrifice across generations and with other sources of support. Our regulatory and legal frameworks and our mandates prevent us from doing more.
Among industry leaders tasked with evolving workplace pension plan design, discussions about how to manage the trade-offs between contributions, benefits and returns are complex, sensitive, and naturally more pragmatic than aspirational. Echo-chambers of well-intentioned expertise and defensive or traditionally-minded stakeholders tend to generate incremental reforms (with some wonderful exceptions, yay Common Wealth and Longevity!) and not rocking the boat is cast as good governance.
Most painfully for me, even pension leaders trying to innovate struggle to have an open, creative dialogue about potential change, despite the obvious change around us. The original model of a pensioner – a (white cis male?) worker with one career job and a traditional family structure – is no longer representative of the diversity and flexibility of Canada’s labour force. Canadians’ trust in leaders, institutions and information is disturbingly low, and the ‘set it and forget it’ model of retirement planning seems incongruous with the prevailing attitude toward social problems. While structural trends are challenging plan sustainability, conventional thinking is decreasing plan relevance.
It makes me think of Stone Soup, the folktale that describes how curiosity, creativity and a change of perspective turns boiling water and a rock into a delicious, nutritious meal enjoyed by all. This is the argument for engaging differently with the end consumers of our pension plans.
If we treat pensions as a product we want customers to buy, how might things be different? If today’s pension is the rock, what features, services and experiences would our customers want added or removed to create value? We don’t know what is possible, until we think about the problem and ask for solutions in a new way. And we don’t build rocket ships unless we can see stars.
Today, we have tools to ask, engage and create that were not available to previous pension planners. Behavioural design supports understanding and guiding customer behaviour. Technology offers new optionality on customization, communication and cost. Innovation is a discipline, especially at pensions. And, as data has become more valuable and available, customers expect to be engaged and informed.
Take computers as an analogy for pensions – a similarly complex product, inaccessible to the average user, that transitioned through customer-centric design to deliver enormous impact. Most of us probably still don’t really understand how computers work, but we’ve all got one in our pockets we can’t imagine life without! And today, the winning computer companies aren’t computer companies at all, but providers of winning experiences that incorporate customer feedback and extend well beyond what was originally thought sustainable or relevant.
I want sustainability and relevance for Canada’s pensions (more on this later), and I’m willing to try new things to help get it. So, we’re asking Canadians to take this survey and tell us what they want in their pension soup.
We’ll be following up with conversations with Canadians about how their career and retirement journeys are changing. Our goal is to bring new voices and ideas into the pension plan design conversation. We want to explore what the post-pandemic economy and the newly immigrated to Canada will require and imagine new models of pension plan design – perhaps as seemingly unreachable as stars, but compelling enough to inspire a few rocket ships.
We need your help to reach Canadians from many different communities – please share our survey with your network. We’ll be sharing what we learn from this research over the coming months and, as always, welcoming your feedback and suggestions at firstname.lastname@example.org.