The Future of Pensions and Bereavement "Injustice"

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1:24This is not a recommendation or offer to buy, sell or attain any specific investment or service. Hello, welcome to this Moneybox podcast. Three UK charities say the way some bereaved families are being treated by the pensions administrator Capita is an injustice. And more than a trillion pounds of our savings is sitting in accounts, paying nothing or next to nothing on them. But first, pensioners in future will be poorer than pensioners are today unless we radically improve the amount people are saving. In an exclusive Moneybox interview, Professor Nick Pearce from the Government's Pension Commission calls for major reforms in workplace pensions to increase the amount people are saving for their retirement, though he did warn it would take the next 20 years to get there.

2:11If you're asking me, do we need to reform our auto-enrolment system to improve contributions and savings, the answer is yes, unequivocally. Government figures show that around 18 million working-age adults are not saving into a pension at all, and that includes nearly half of those who have a job. Those most at risk are women, low and middle earners, part-timers and people who are self-employed. Professor Pearce also told me the Commission's recommendations will include changes for self-employed people who are currently excluded from auto-enrolment into a pension scheme, and few of whom save anything for a pension.

2:49Our reporter Jo Krasner spoke to 65-year-old Sarah, who's been self-employed for some time. I was lucky enough to have opt-in pension options when I was working for commercial organisations, But really, the last 20 years on and off, I've been self-employed. And that's meant it's been up to me to make decisions to do that. And I did pay into a personal pension somewhat. But being self-employed, it's been quite difficult to do regular, consistent and decent contributions into that pension. I didn't really think about it in the early days because I was concentrating on starting my business, finding clients, getting my business up and running.

3:35So because you only have a small pension pot at the moment, are you worried when you retire? I am. I think I always hoped that in my retirement years, there'd be opportunities to take some more holidays, do some good things in that time. And I honestly don't think there'll be as many opportunities to do the kind of things I'd hoped I would do in my retirement. Well, the Pensions Commission published an interim report earlier this year. But Nick Pearce, who's also Professor of Public Policy at the University of Bath, came on Moneybox to give us his latest thoughts. I suggested to him that a brief summary of that interim report was, we still have a serious problem of inadequate retirement incomes and pensioner incomes may fall in future because many people are simply not saving enough.

4:23Yes, it is true. I mean, that is basically the diagnosis. We have the lowest pension saving rate in the G7 economies and we've had real success in the last 20 years, and I think this is really important to register, real success in reforming the state pension and we've had real success in crediting women in particular into their state pensions. but we haven't had the same success in improving the rates of saving in workplace savings we've got a lot of people in auto enrolments brought a lot of people in 90 of people who are eligible to save in the workplace are doing so but they're not saving enough but of course a lot aren't eligible sorry to interrupt yes a lot aren't eligible are they and people on low incomes people below the age of 22 people who don't earn 10 000 pounds or more from one job they are not auto enrolled, they're not paying in.

5:14The Pensions UK told Moneybox recently that there should be specific changes to those rules. Are you moving in the same direction to bring more people into auto enrollment? We're certainly looking at exactly those rules about when people start to contribute to a pension, the qualifying earnings on which they contribute, and the levels of their contributions. Because precisely as you say, at the moment there are people who are excluded from pension savings, by virtue of low earnings or time out of the workplace. And there are those, like the self-employed, who we haven't got a mechanism for bringing into auto-enrolment.

5:49And the rates are such that if you're a low earner in particular and a median earner, you're only going to be paying at the 8 % at the moment and not a path. Yes, and that's 8 % of a band of earnings. It's a bit less than that, particularly for low earners, isn't it? Do you think those rates should be changed? That's something the Work and Pensions Committee has started an inquiry into this week. Yes, we are looking precisely at that question, whether the rates do need to rise, and if so, by how much and over what kind of time period. Most countries in the world have higher rates of workplace contributions than we do in the UK.

6:24We brought them in carefully. Water enrolment was staged in its implementation. They didn't go to 8 % immediately and overnight. And so any change has to be thought through carefully in that way. Staging and phasing of reform is important, as well as the balance between what individuals and their employers contribute. But it's certainly the case that if you look at the under-saving problem we have, you would root a lot of that in the fact that we're saving at low levels. Getting people to pay more, though. I mean, your commission is the first of 20 years, isn't it? Just saying people should save more, that's not that revolutionary or even that new, is it?

7:00We've heard that on the programme many, many times. Are you looking at any new solutions, any changes that will help? Well, we've got to think about policies that will help those that are completely outside the auto enrolment system at the moment. So the self-employed or a particular group, only 4 % of those people whose earnings are entirely from self-employment, they don't have other earnings, are saving into a pension. And for the young self-employed, it's like one in 40. It's a really low rate. So we've got to design a system which brings the self-employed into much higher rates of pension saving.

7:31Traditionally, they've done it through housing, owning a business and other things. that doesn't appear to be the case for lots more of the self-employed now, particularly the younger self-employed. So there are going to need to be reforms that change and develop the system that we have. So there will be something for self-employed people. I know you're not reporting for a few months, but can you give listeners any hint what that might be? No, I really, at the moment, I mean, we're still in the process of developing our options, doing all the research, making sure that we've got that really robust.

8:00So I don't want to start indicating to people a solution that in the end we don't recommend. We're just really, really doing a very thorough job of this. And so I just ask for a little patience from your listeners for what will end up being in our final report. But you can rest assured that this challenge of the self-employed is a really central one to our work. We're not going to duck it. It's really, really important. Can I conclude that when your report comes out in the spring, you will be recommending enhancements to auto-enrolment, but they won't be happening immediately. They'll be happening in a staged way over a number of years, so that by, say, I don't know, the 2030s, maybe 2040s, you will have got to where you wanted to be, and from then on, people will do better.

8:47Yeah, we will be setting out in our final report very clearly what we think adequate pension incomes look like for people in retirement in the 2050s and beyond, and we will be working back from that to say, what does that mean for auto-enrolment in particular? What does it mean for the balance of state and private pensions? And how do we plot a path to getting to those adequate incomes? We're definitely going to be doing that. These are the core of what we're doing. Professor Nick Pearce speaking to me this week. And as we heard there, any changes will take a while. But what if you're 25 or 35 now, with rent, student loan payments, saving for a home, maybe paying into a pension can seem very low priority.

9:29Well, Wednesday's Moneybox Live with Felicity Hanna is called Saving for Your Future Self. Are you in a workplace pension? Are you paying in extra? Are you worried the state pension might disappear? Or do you fear you may not retire until you're 96, like the investment guru Warren Buffett this week? Well, email moneybox at bbc.co.uk or send us a WhatsApp voice note on 033 06 78 3 183. And now... I think it's scandalous that people are being treated in this way. I do think it's an injustice. That's the chief executive of Hospice UK, Toby Porter. He was reacting to the way widows and bereaved families are being treated by the firm Capita.

10:14Now, listeners will recall that Capita runs the civil service and the teachers' pension schemes. Last week it admitted more than 1 ,300 families have been waiting well over three months for death in service payments or survivor pensions from the civil service pension scheme. Judith Hudson is one widow who's waited months since her teacher husband died. No information for her about even what widow's pension she'd get from the scheme, still less any money. It was only when Moneybox contacted it on her behalf that her widow's pension and thousands of pounds back dated suddenly appeared. Moneybox's Dan Whitworth went to talk to her.

10:54For nearly half a century, this remote cottage on the side of a wooded valley in Herefordshire, right on the border with Powys in Wales, was where Judith and Duncan Hudson made their home. Hello Judith. Good morning. Hi. Hello. How are you doing? Pleased to meet you. Good. Duncan and Judith were both teachers, Duncan having spent 39 years in various schools before finishing his career as head of chemistry in a nearby secondary school. That's the wedding day. Oh, fantastic. Wow, he had a good beard. He did. Strong beard. He could turn his hand to anything and living here, he had to. He was adventurous.

11:33We did a lot of travel. He was wonderful. He was a one-off, he was a scientist, he had the most wonderful brain and he loved teaching, teaching kids he loved. Duncan died in April and Judith spent months waiting in vain for any help or information about what she was entitled to from Duncan's pension. When you are bereaved and when you're bereaved after 40-odd years together, you don't know where life's going to go, you have no idea. I mean Duncan did everything financially so I never had to worry but but when you suddenly I've got my own pension and teacher's pension and that was enough for me to live on but no extras I've got an old car that needs replacing there was no way I could replace it until I knew what settlement I got coming from Duncan and the cost of living as we all know is going up but without knowing the certainty of what my financial situation was going to be, I couldn't go forward any further.

12:35When I finally opened this envelope and it had got all the details of Duncan's pension, everything, but then they admitted that, oh, I had a profuse apology, and it said to the effect that the turnaround is usually 20 days from registering the death. Hang on, 20 days? 20 days it should take. And you were five months and only because Moneybox got involved. Absolutely, yes. I think if you hadn't got involved, I'd still be waiting. Just sum up how that makes you feel. Angry. Overjoyed that I'd actually got my self-satisfaction, yes. But the pleasure within seconds had disappeared and anger came in because you shouldn't have to do that.

13:22I'm wonderful and grateful and just wonderful it's over for me but that's not right, that's not good, that's not good enough what about the people who haven't got in touch with you and you can't take everybody's case on How more secure are you financially now after all these months of waiting that you actually have what you're entitled to from Duncan's pension? A lot more secure, I know where I stand and I can start making plans on how I do deal with it. So the insecurity has gone, but the anger is still there that it shouldn't have happened. Dan Whitworth reporting. Well, Capita has apologised, as we heard.

14:02I've lost track of how many times it's done that. It did that again about Judith's case, and I have to say Patricia emailed us this morning. Her husband died in April and she said, quote, apologies are not enough for this catastrophic debacle. The Department of Education tells us such cases represent a very small proportion of overall claims, though it doesn't say how many, and it expects Capita to resolve issues as quickly as possible. Listening to all that is Sarah Middlemiss. She's from the Hospice and End of Life charity, Marie Curie. Sarah Middlemiss, were you shocked at the way Capita treated Judith at such a time?

14:38Yeah, Judith's experience is very difficult to hear, and I'm really glad that Moneybox have helped to get a more positive outcome from Capita in her individual case. But unfortunately, I'm not that surprised to hear this kind of thing. Research by the UK Commission on Bereavement suggests that around two thirds of people face problems with at least one administrative task after a loved one's died. So I'm sure those experiences will really resonate with many of your listeners. Yes. I mean, we know more than 1300 bereaved families waiting well over three months. Teachers pension scheme we don't have figures for.

15:11What do you think capital should be doing? It's been going on for months, well, years, this. yeah um and unfortunately it's really widespread sort of across multiple sectors so um financial companies but also energy companies um telecoms companies a whole range of things and ultimately at Marie Curie we really want to see minimum standards introduced for companies um which will mean that bereaved people can expect a compassionate and consistent service wherever they are in the UK but companies don't have to wait for regulation and there are really easy practical improvements that they can make right now, which is why Marie Curie are running our Make Sadmin Simple campaign, calling on companies to act.

15:52Well, we do know that Capita is going to lose the contract to run the civil service pension scheme. The government's going to bring it back in-house. Hope that would be better. You said your experience of many financial companies, banks, water, telecoms and so on is bad. Why are they treating people so badly at this time. Surely it's just basic humanity to have a sensitive system in place at this difficult time. Yeah, you'd think so. But at Marie Curie, people often tell us that the admin after a death, which, like I said, is sometimes called sadmin, can be really confusing, time consuming and frustrating.

16:27And we often hear about long delays, having to repeat information over and over again, unsympathetic communications and systems that just simply aren't designed with bereaved people in mind. Yes, and of course you have to repeat it to several companies and that would take some kind of government interaction to make it sort of one thing. People say, well, I told tell them once, but they don't tell everybody, do they? I know that Cruise, the bereavement organisation, is also told Moneybox this is a great injustice. It does offer training for firms, doesn't it, to deal better with bereaved people.

16:58Should people be looking at getting some help to improve their approach? Yes, one of the recommendations we have for companies is to provide staff with better bereavement training so they're more sensitive when dealing with customers who are in situations like Judith's. And for many of us, in terms of what we can do, we tend to put these conversations off, but proactively getting your affairs in order and making sure your loved ones know your wishes can really help reduce problems. But if you're dealing with issues, you're not alone with this and Marie Curie has lots of free information practical guidance and emotional support on our website which I'd really encourage you to make use of.

17:38That's maricurie.org I think Sarah Middlemiss of Marie Curie thanks and emails are pouring in dozens today from bereaved people waiting months for their money from capita including Gail who's still waiting for the widow's pension she's entitled to a year a year after her husband died last September. Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments. Capitalize on around-the-clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker and get started. See what adding futures can do for you at cmegroup.com forward slash podcast.

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19:02More than a trillion pounds of our savings is sitting in accounts that pay little or even no interest, when it could easily be earning a lot more elsewhere. Those figures come from the Bank of England, analysed by the investment platform Lightyear. They show£1.2 trillion is in UK bank and building society accounts, and a quarter of that is earning no interest at all. The rest is earning just 1.64%. About a third of the best buy rates you can get. The top two easy access accounts are paying 4.5%. If you fix your rate for a year, you can get around 5%. Well, van der Hoetges is the company's chief executive.

19:42I think we are used to expecting current accounts and low-yield savings accounts to not yield very much because that's what it was like for about a decade before 2020. And as the market has changed and the Bank of England is paying much more for your money, we should demand that we get the same paid on the deposits we hold with banks. And I think for sure it's awareness. We can all change this individually. We can all look at alternative places for our money. And I think it's something where banks also have a duty to make sure that they make customers aware of other savings products that are out there.

20:15Well, the Bank of England kept bank rate at three and three quarter percent this week. but why do people leave their savings in accounts paying so much less even than that? Dan Whitworth's been speaking to people in Shrewsbury. I do have savings. I don't know what interest rate. Off the top of my head, I don't know. Do you ever switch? Do you ever shop around? I have done. I use a financial advisor for a lot of my savings stuff. I kind of wanted to do a bit more with it than just keep it in a small savings account. You want any money to work harder for you? Yeah, a little bit, yeah. That's good personal finance.

20:48Yeah, I try. Getting over 3%, I know that, on my savings account and my ISAs. And I know I could be doing slightly better, but I'm too idle. Because, you know, I mean, I don't have a lot of money in terms of people having a lot of money, but I've got plenty for my needs. I think one of them I've got about 1%, maybe 1.05. So not a lot. No. And then one for 3.75, I think. Oh, 3.75. Yeah, so that's pretty good. Have you got any savings? Yes, I do. Do you know what interest rate you're getting on them? Only because I looked the other day. Good. And? And? 1.6. 1.6? Do you think you should shop around more?

21:29Yeah, definitely. So if you know you should be shopping around and you're not, why not? You know, you get home from work and you've got 101 other things to do. So it goes to the bottom of the pile. Well, I've now to talk to Andrew Gall. He's Head of Savings at the Building Societies Association. Andrew Gall,£1.2 trillion sitting in UK savings accounts, earning on average overall around 1.2%. Does that concern you? It does. And within that analysis, I think there was over£300 billion that's not earning any interest at all. And it means that people are missing out on interest that could be building up to help them achieve their savings goals.

22:07And one of the aims of UK Savings Week, which is happening next week and is now in its fifth year, is a campaign to get people engaged in saving so they can make the most of their money that they do have saved. And our figures for that campaign show that younger people are often the most affected, actually, with 36 % of them saying they never check the interest rate on their account, whereas across all adults it's near a quarter for both. So not great, but it's especially a problem for young people. So we're really trying to engage them in this campaign. Yes, but should you even have to engage them?

22:38Why don't your members just put the rates up? I was checking some rates and six of your smaller members pay 1 % or less to their customers on some accounts. Why don't they just pay them more? That would solve this problem of, oh, I've not got enough time to do it. Yeah, there's lots of factors that go into setting the rates and providers have to be really alive and careful at managing their inflows to make sure they're sustainable for the business overall and match with competition in the market and lending objectives. and there's certain needs as well where people want accounts where they have access that where they tend to have lower rates but also there's types of accounts such as affinity accounts where some of the interest goes to a good cause or there's some of those rates where there's certain conditions around withdrawals for example where if you don't meet those then you drop to a lower rate so yeah I mean those conditions the industry sorry those to interrupt those conditions put people off though, don't they?

23:36You get a headline rate but then if you do the wrong thing, you take too much money out or withdraw too often it clonks down to something ridiculously low. I have to say in your defence, the banks are no better. Just about all the biggest retail banks, you know Barclay, Talifax, Lloyds, NatWest Santander and so on, they all pay 1 % or less on some accounts and these figures I should add are from MoneyFat this week. But Andrew, why do you think people are leaving their money in these low-paying accounts is it just bottom of the pile better things to do as we heard from that lady in shrewsbury and just to pick up on your previous point that yeah actually building 30s africa show they're they're better actually and overall on average pay 2.1 billion more in interest last year than the market average so and i think particularly do pay higher rates on uh kind of historic accounts as well um but to come to your question around why people are leaving money and low paying accounts we've done loads of research on saving behavior over the last few years as part of the uk savings week campaign and there's such a a lot of factors that influence individual savings behavior so it's down to context attitudes culture it's not as simple as people on high incomes do this and but there's three factors really for this i think and some of the uh savers you spoke to just before um that this section came we talked about she i think one of them referred to idleness I'd say it's more inertia they don't have the time to act mean to but never get around but doesn't that tell us that with the consumer duty where you have to act in your customers interest and not your own interest you should just be putting these rates up not waiting for people to go and look around for a better rate as you say the consumer duties come in which um it's since 2024 and has required providers to make sure that they're providing fair value and being really proactive in contacting savers on lower rates and tailor their communications, particularly to those who, say, have large balances in instant access accounts or in the particular vulnerable circumstances.

25:40So you are writing to them to tell them to change. Andrew Gall from the Building Societies Association, thank you. And emails are still coming in. And I've got one here about pensions that we did earlier. And this is from Matthew. And he says he's on minimum wage, part-time job, just covers his rent, not his other bills. etc. He gets universal credit. How on earth, he asked, do you suggest I or anyone like me saves in a pension plan, a plan incidentally which makes money for the administrators? Thank you very much for that, Matthew. Well, better information, putting customers first and value for money could almost be a trail for the Moneybox podcast.

26:17And remember, you can hear us live every Saturday at midday on BBC Radio 4. You can help set our agenda by emailing moneybox at bbc.co.uk, as many of you have. You can also send a voice note or comment on WhatsApp 0306 783 183. You might get on the show, as Judith did today. In this podcast, the reporters were Dan Whitworth and Joe Krasner, researcher Amber Mahmood, studio manager Amy Gallagher, our editor is Jess Quayle, I'm Paul Lewis, and this was a BBC News Money and Work production for BBC Sounds. I haven't seen my son since 2012. That's the last time I hugged him. I know that my son is somewhere alive.

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