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Should financial firms live by these golden rules?

Nest, the new government pension scheme, has drawn up eight rules for communicating with the public – but should the rest of the financial services industry adopt them?


by Michelle McGagh on May 22, 2012 at 13:03

Should financial firms live by these golden rules?

The terms ‘auto-enrolment’ and ‘Nest’ may not mean much to you now, but by the end of the year you won’t be able to escape them.

Under an ambitious new plan to get people saving for retirement, the government is planning to automatically enrol ('auto-enrol') private sector employees into workplace pension schemes. For those companies that don’t operate a pension scheme the government has developed a low-cost solution called the National Employment Savings Trust (Nest).

Nest is a not-for-profit organisation, and the pension scheme will aim to be low cost and allow you to move you pension with you as you change employer.

The golden rules

At a Nest briefing this morning, it set out its eight golden rules for communicating what it does to the likes of you and me.

The rules aren’t rocket science, in fact they’re pretty sensible:

  1. Keep it real: using real-life scenarios so people can understand how Nest relates to them.
  2. Rights not responsibilities: letting people know what savings options are available to them rather than nagging them about the consequences of not saving.
  3. Out with the old: making pensions relevant to peoples’ lives now by using examples and images that relate to them rather than instilling scary thoughts about old-age poverty.
  4. One for all: letting people know that they are not the only ones saving into a pension will provide reassurance they are doing the right thing.
  5. Tell it like it is: dropping the jargon and technical terms and explaining in plain English what saving more (or less) means for their future.
  6. Give people control even if they don’t use it: automatically putting people into funds but giving them the option to change them if they please.
  7. Take people as you find them: provide as much information to people as they want, some want details of all the figures but other people just want the headlines, give them the choice.
  8. Be constructive: don’t tell people that not saving for retirement is a problem, offer solutions instead otherwise you risk scaring them off altogether.

What struck me at the meeting is just how simple the rules are. So simple in fact that it’s amazing the rest of the financial services industry has never tried this common sense approach before.

Every financial services company should be trying to adhere to these rules when they try to sell a consumer a product. How much easier would life be if financial companies provided clear, jargon-free information about their products and gave you flexibility within that product (if you want it)? I know I could do without the reams of paper (which I never read) that I receive when I buy a product.

The financial services industry would do well to take particular heed of the rule that says ‘be constructive’ – it is not uncommon to phone a company’s call centre only to be passed from pillar to post accumulating problems, rather than solving any.

Of course, Nest hasn’t officially launched yet, so we have yet to see how these rules will work in practice, but it is a good start and hopefully a catalyst for change for the rest of the financial services world.

Let us know what you think of the rules, which appeal to you, and what changes you would like to see financial services companies make to serve you better.

5 comments so far. Why not have your say?

Thornton Holmes - Orchid Financial Services Ltd

May 22, 2012 at 15:47

Any IFA worth his salt has been explaining the complexity of retirement planning in easy to understand laymans terms for years. We are here to decipher the Jargon that these companies churn out. As far as NEST is concerned though who in their right mind would actually entrust their lifetime savings to something that is so ill thought out and actually quite expensive and inflexible. Run by a Japenese car manufacturer because no provider was prepared to tender, charges on EACH contribution of 2%, Inheritance Tax liable, to name just a few drawbacks. This is a real opportunity for IFA's to audit existing schemes and provide employee benefit systems and packages to Employers that will provide real benefits and significant savings to employees. Employers do not have to choose NEST and can instigate a far better scheme bespoke to their business using Independent trusted advice from people who actually know what they are doing instead of having something thrust upon them by people who do not.

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Clive B

May 22, 2012 at 16:18

"6. 6.Give people control even if they don’t use it: automatically putting people into funds but giving them the option to change them if they please. "

I see this somewhat differently, as least as far as NEST goes...

Forcibly sign people up for something, spending their money, then rely on their apathy to keep them there.

NOT something we should strive for.

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Chris Clark

May 22, 2012 at 21:09

I disagree Clive.

The main reason I believe people were reluctant to save for a pension is they see it as a monthly reminder of age and mortality.

It's hard to explain to a 28 year old that life can be fun at 78 too.

(Though I'm only 57!)

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alan thorburn

May 26, 2012 at 12:44

Is this not what National Insurance was invented for ?

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Michael Peters Fenwicks

May 27, 2012 at 06:42

"Keep it real: using real-life scenarios so people can understand how Nest relates to them."

- Covers all the above while my grandfather would often say that practicing the golden rule was not a sacrifice but an investment towards the life cycle of the client relationship.

Nest website is great example of simplicity at best - noteworthy of examination.

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