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Leverage the trust people have in credit unions to create personal pensions. [1/20: Persona's, User Feedback, Prototype in Attachmts]

Create personal pension products for individuals and distribute them via credit unions.

Photo of Wingee Sin
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Who is your idea designed for and how does it support the dreams and obligations of those 50 and older?

This product is designed for those 50 and older. It supports their dreams and obligations by creating a steady income stream from their earlier savings. It leverages the credit union client relationships and physical distribution network to offer individualized pension plans at scale. It is human-centered as it address the need for financial security that many experience in later stages of life.

Context

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Trust is lacking for financial institutions such as banks, money managers, and insurance companies. This has caused a lack of adoption for financial products and services that helps individuals manage their finances.  This is especially acute in the annuity space.  However, annuities have a very important role in one's financial wellness, especially in later stages in life, and in particular in helping manage longevity risk.  


In the past generations, people have had workplace pensions (defined benefit plans). However, with the closure of many defined benefit plans, defined contribution plans (401k/403b plans) emerged.  There are many great benefits to a defined contribution plan, however, it does leave a whole series of financial decisions to the individual, who often times may not have the time, knowledge or interest to manage their finances.  Furthermore, defined contribution plans currently covers less than 50% of the workforce, creating a further need for a retirement plan outside of the workplace. 

DB vs DC %


Why a credit union?

Creating a personal pension product and distributing it via credit unions have the following appeal:

Trust

1) On a retail basis, the trust one has for a credit union seems to be greater than other financial service providers. As such, I believe credit unions are in a unique place to create this social impact, especially in light of its non-profit business model.

2) In light of longer lives, we are moving from a work life of retiring at 65 to one that transitions into different phases of one's life.  As such, we are also changing jobs more frequently, and having a financial institution that is outside of the workplace to hold one's pension makes a lot of sense.

3) If credit unions can become of union for people, and create communities, I believe this can be a better venue to house one's pension than a tradition financial institution. 

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How might a credit union create such a product?

A credit union can create such a product by combining a selection of investment and annuity products to create the desired pension characteristics.  This can be completed by the credit union or by hiring an investment manager, institutional investment consultant, or an insurance firm.  There will likely be a need for middleware provider to administer the recordkeeping aspects of the solution. (I will leave out the technical details of implementation, but can certainly elaborate further on how this might work.)

The distribution of the product should be framed as a pension for individuals when they first open an account at the credit union.  Contributions to it can be a transfer from workplace savings plans, or perhaps even in addition to that contribution, an automatic deposit monthly. 

What early, lightweight experiment might you try out in your own community to find out if the idea will meet your expectations?

We can do the following to test the idea:
1. survey the credit union client base, describe the characteristics of the product, and collect their feedback and reiterate.
2. see traction of existing retirement or investment product of credit union, and identify pain points
3. conduct segmentation analysis of existing credit unions, and see if current clientele are good fit
4. conduct focus group research of non-credit union members to see if they would join a credit union for this product

What skills, input or guidance from the OpenIDEO community would be most helpful in building out or refining your idea?

Current credit union product teams, staff members, investment and annuity professionals.

Tell us about your work experience:

I am a reformed Wall Street product designer! Currently pursuing my second act in social entrepreneurship to create greater financial security for the American dream. I specialize in design of financial products, and have a passion for all things relating to longevity.

Please check all that apply:

  • I'm not currently involved in a credit union, but am curious to learn more!

This idea emerged from

  • An Individual

How would you describe this idea while in an elevator with someone?

Hi Grandma, Your work retirement plans says you have saved $500k in your 401k plan! Good job! With your retirement next month, you should use a portion to buy a personal pension. Since we are likely to be living a long life (90+!), a personal pension will just send you a paycheck for the rest of your life, so you won't have to worry about running out of money.

How might your idea be transferable to a large number of people?

Product: The amount of the product available is subject to the capacity of annuities being provided by insurance companies. For the most part, I do not foresee an issue with capacity, considering the size of the 50+ retirement assets of credit unions. Further, individuals will probably only use a portion of the assets to purchase the personal pensions.

Distribution: This will leverage and likely increase the current wealth management teams. We should also consider digital distribution.

How do you plan to measure the impact of your idea?

1. Amount of assets into the product
2. Amount of income distributed from personal pensions
3. Incremental revenue of product in addition to standard credit union products
4. Length of time someone is a credit union client (hopefully significantly longer, and till end do we part!)
5. Net promoter score of credit union of personal pension client vs. non personal pension client
6. Longitudinal study of trust by personal pension clients
7. Life expectancy of personal pension clients

What are your immediate next steps after the challenge?

1. survey the credit union client base, describe the characteristics of the product, and collect their feedback and reiterate
2. see traction of existing retirement or investment product of credit union, and identify pain points

40 comments

Join the conversation:

Comment
Photo of Anne-Laure Fayard
Team

Congratulation Wingee Sin I'm really looking forward to seeing your idea evolve. We were talking with Adhish Patel Kathleen Chao today and thinking that it might be nice for them to have a quick chat with you to explore further potential collaborations.

Photo of Wingee Sin
Team

Anne-Laure Fayard  Thank you so much Anne! I appreciate it!
Adhish Patel  Kathleen Chao : I would love to have a chat! I can be reached at wingee@gmail.com. Thank you!

Photo of Adhish Patel
Team

Hi Wingee Sin ,

I've messaged you on LinkedIn with the details. Once again, Congratulations on the selection.

Best,
Adhish

Photo of Wingee Sin
Team

Thank you so much Kate! Appreciated all the feedback and encouragement along the way! I am so thrilled the idea has made it to Top Ideas! I look forward to the feedback of the evaluation committee on developing it further!

Thank you to everyone on the team, and to those who provided feedback and support!

Photo of Kate Rushton
Team

Congratulations, Wingee :-)

Photo of Bettina Fliegel
Team

Hi Wingee.
What would be the benefit for someone to choose a personal pension vs. maintaining a 401K and accessing the profits from that over time? It seems that one would need some sort of financial advisement on how to invest their savings in both instances. Is that correct?
Are pensions an alternative for people who might not have retirement funds in 401k type accounts?

Photo of Anne-Laure Fayard
Team

Hi Wingee,

I have to admit that I'm like Bettina, I'm not sure I fully grasp the difference btw the work plan (401k type) and a personal pension. Also I'm not sure I understand the last part of your explanation to your grandma: "Since we are likely to be living a long life (90+!), a personal pension will just send you a paycheck for the rest of your life, so you won't have to worry about running out of money!" I'm not sure I understand why she can get money until the rest of your life... She might but this depends on how much she has in her pension plan and how long she lives, isn't it? and of course what is the amount of the check? I'm sorry if I'm completely missing the idea. :-(

Photo of Wingee Sin
Team

Thanks Bettina! Great questions!

This is not a product to replace your workplace 401k. But rather help use what you have save and invested in it be converted into a stream of paychecks after you have left your workplace. A few pain points of 401k's for doing that now:

1. 401k currently only covers half of workforce, so many do not have that. (contractors, small business owners, etc)
2. once you leave your workplace, you have a series of 401ks, and so what a lot of people do is roll them into an IRA, typically high fee products.
3. it still runs out of money, as it does not include annuities

You are corrext both need adisement on how to invest their savings.

I would say what I am proposing is a different type of pension, and 401ks are also a type of pensions.

Thanks for the feedback!

Photo of Wingee Sin
Team

Hello Anne!
Thanks for your questions!
1. The main difference is that this is intended for when you have left your work. The idea of having pension outside of the workplace compliments the more fluid workforce now.
2. The money is converted into an annuity, as such it continues to make payment until end of life. An insurance company takes on pooling assets with different individuals together, managing mortality risk. Versus in a 401k, because annuity products are not widely available, we are left to just using investment products to solve this challenge. This means you run the risk of running out of money. To summarize, when you buy an annuity, you get a stream of paychecks. The amount of the paycheck is the price of the annuity. The insurance company is responsible for pricing and figuring out how to not run out of money. The credit union is responsible for evaluating different insurance company's annuity products, learning about your overall financial picture and goals, and then helping you decide thr appropriate amount of the pension. All this does depend on how much money you have saved.

Thanks for the questions and the chance to clarify further the idea!

Photo of Kyle Turner
Team

This is a promising idea but I have one major concern. This type of product would rely on someone who has already saved well for the 'buy in'. These customers would essentially be choosing to convert a portion of their retirement savings into a pension that would guarantee a fixed monthly payment. You stated that half the workforce does not have a 401k. Where do you envision a majority of the funds needed for the buy in coming from? This looks like it will help diversify those who have previously saved well but will have too steep of an entry for those who are unprepared for retirement. Do you envision alternative collateral (such as a house) being used for the 'buy in'?

Photo of Wingee Sin
Team

Thanks Kyle! Great point!
Indeed - there is no magic bullet that financial products can offered if there is no capital to begin with.
I had submitted a separate idea of elderhood internships as a workforce development idea for the 50+ community.

That said, I do love your suggestion of the house as an asset that one can use to raise capital to purchase the pension. Specifically, I would suggest a strategy of downsizing - ie: selling house, buying condo, and then using the excess proceeds to purchase the pension. Ideally the pension payout covers all the monthly fixed expenses, and one still has sufficient capital leftover as an emergency fund.

Further, in my 2nd persona, I did the experience map of someone who became an Uber driver. That would be another way to earn income, and set aside a portion of the income for purchasing the pension.

Thanks for the feedback! It's much appreciated!

Photo of Kyle Turner
Team

Downsizing is certainly more straightforward and less risky for the financial institutions than taking assets as collateral.
One other comment I can think of is to mention a similar 401k plan that was offered at my previous job. This plan followed a target date glide path in terms of investments but there was also an option to opt into a secure income asset. This essentially phased in contributions toward an annuity-like product but was seamlessly incorporated within the 401k asset mix rather than a standalone product. Just as the asset mix in a target date fund moves from roughly 80/20 stocks/bonds to 20/80, this added a third component which started at 0% but grew as the person aged until it was large enough to cover the desired level of future fixed payments.

Photo of Wingee Sin
Team

Thank you Kyle! Yes, great to hear you had access to such a product in your prior workplace.
I am hoping to be able to offer such products in a credit union, so that for all those left out of the workplace savings plan (>50% of the US population), they have access to what you are describing.

Thanks for sharing your experience!

Photo of Kate Rushton
Team

Thank you for the updates, Wingee. It is interesting to see the number of 50+ that are airbnb hosts and uber drivers.

Photo of Wingee Sin
Team

Thank you Kate!
I recently came across the below post on Uber (https://www.bloomberg.com/news/articles/2017-01-23/when-their-shifts-end-uber-drivers-set-up-camp-in-parking-lots-across-the-u-s), and led me to think hard on whether providing flexibility in work access in excess also crosses the line on actually challenging financial security and wellness of an individual. After much deliberation, I came the conclusion that perhaps if someone was ubering part time, and using that income to supplement their livelihood, that is additive to financial security. However, if that is the main source of income (works >40hrs per week), then given the fact that there is no benefits or retirement savings attach to that, it is actually detracting from financial security. This highlights the importance of the use case of personal pensions with the credit union with Uber.

Photo of Lorena
Team

Hi Wingee,
Wonderful idea, a market with lots of possibilities!
Would this annuity option be capped or have any savings limits currently reserved in 401Ks or IRAs plans?
What about age limits? Eligible to enter at age XX.
What would be the Fee structure, how would it differ from current retirement planning, to make it feasible for insurance companies interested in promoting? Lastly, probably an obvious question, can the annuity be left as part of an inheritance?

Lorena

Photo of Wingee Sin
Team

Hi Lorena!

Thank you for your questions and feedback!

This annuity option does not have a cap, you can contribute to it with 401k or IRA or other sources of savings. The difference is whether you have paid taxes on the money you contribute to this pension.

Age limits will likely be around 50 or 55, prior to that time, there will probably be an option to invest in a investment fund (as opposed to an annuity). All this, however, will be handled within the pension. So you do not have to worry about it.

In regards to the fee structure, you will be provided with a price for the pension. The credit union will be responsible for ensuring the pricing for the annuity is fair, and competitive.

It is my hope that insurance company will find it feasible to partner with credit unions, as it will be a new channel of distribution.

Lastly, the annuity will not be left as part of an inheritance. What instead I would suggest is to only use a portion of your retirement savings for the pension, and the remainder of your assets can remain liquid and have complete flexibility (including inheritance).

Hope that helps! Thank you for your feedback!

Best,
Wingee

Photo of Adam Corn
Team

Hi Wingee,

Very innovative concept and beautifully written. I'm very impressed and excited to see where you take this in 2017 and beyond.

Adam

Photo of Wingee Sin
Team

Thank you Adam!

Photo of Paul Nguyen
Team

Hola Wingee,

Great idea about leveraging credit union to create smooth out income stream for folks in their late 50s and older. Would love to share with you some of my ideas offline.

Paul

Photo of Wingee Sin
Team

Thank you Paul!

Photo of Kate Rushton
Team

Hi Wingee!

I hope you had a good start to the year.

What would be the user journey for your service for a persona e.g. Retired Fashion Editor (60) ? What step in the user journey could you prototype and get feedback on?

Photo of Kate Rushton
Team

There is a really good example of the Women's Pool Idea in İstanbul that might give you a few ideas - https://challenges.openideo.com/blog/experience-prototyping-preparations-for-womens-pool-idea

There are a few other finalist ideas from other challenges that might give you a few ideas. Please bear in mind that this is what these ideas are like at the end of the challenge.

UnBroke has a really good user journey and is one of the closest matches I could find to your idea - https://challenges.openideo.com/challenge/higher-ed/ideas/un-broke

'UnBroke creates a new marketplace benefiting both colleges and students by facilitating tuition negotiation.'

WiseGranny also has a really good user experience and use of feedback and focuses on advice - https://challenges.openideo.com/challenge/healthy-lives/top-ideas/economias-colaborativas-de-la-abuela

Wise Granny is a 'Digital interface wich gathers Grandma knowledge (traditions) to encourage healthy lifestyles'.

Also, the financial contract translator - https://challenges.openideo.com/challenge/financial-empowerment-challenge/final-feedback/financial-contract-translator-stop-think-app

Photo of Wingee Sin
Team

Thank you Kate! I have added the experience map! Can you take a look and provide some feedback? Thank you!

Photo of Kate Rushton
Team

Hi Wingee, 

If it is okay with you, I will discuss the user journey on a call this afternoon with a few members of the OpenIDEO team and come back with collective feedback.

Photo of Kate Rushton
Team

Hi Wingee!

Thank you for providing the user journey. I am wondering with your idea, whether it is worth creating several user scenarios.

Check out this example: http://www.openideo.com/open/e-waste/concepting/neighbourhood-e-waste-champion/ where a few scenarios were created to explain the idea in a human-centered way.

Photo of Wingee Sin
Team

ofcourse! Thank you Kate, please do share with the Open IDEO team!
Definitely agree also on the different user experiences. I will try to get 2 more together for this before the deadline! Lastly, I was wondering if the user experience should be more detailed interaction with the product? as oppose to the scenario leading up to it. Thank you.

Photo of OpenIDEO
Team

Welcome to the Refinement phase Wingee! We've added new Refinement questions to your original submission that we'd love for you to answer. Please check out the Refinement Phase Toolkit for instructions on how to answer the new questions and other recommendations we encourage all idea teams to consider in the upcoming weeks.

Refinement Phase Toolkit: http://ideo.pn/2du9sf7

Lastly, here's a useful tip: When you update the content of your post, it'd be helpful to indicate this in your idea title by adding an extension. For example, you can add the extension " - Update: Experience Maps 12/21" to you idea title. This will be a good way to keep people informed about how your idea is progressing!

Photo of Kate Rushton
Team

Hi Wingee!

I look forward to seeing how this idea develops in the refinement phase.

Photo of Dana Ilmari Polojärvi
Team

Hi, Wingee,

Very interesting idea, thanks! What do you see as the main characteristics of the product?

Best wishes,

Ilmari Polojärvi

Photo of Wingee Sin
Team

Hi Ilmari! I see the main characteristics as helping someone buy a private pension.  Not sure if you have experience with a pension - but essentially, it covers provides a stream of income during retirement.  Since we do not know how long we would live for - it is helpful for a financial entity to bear this risk.  It's like buying insurance so that it covers your basic expenses till old age.  The financial products are out there, but the distribution of it does not build trust, and I believe a credit union might be a good place to house a pension.  Would love to collaborate further on this! Best, Wingee

Photo of Obua Godfrey
Team

Dear Wingee Sin,
Thank you  for the great idea. I think we need to collaborate so as to go on well and succeed in our ideas. Please also share with me how people save in your country if different to ours,as well. It might be similar in a way, although there might be some differences here and there, we need to look at the differences and similarities; and see how it fits within the credit union system. I have liked credit unions,as I read about it from the internet; it is not yet common here but we have the workers union,I think they represent the workers to negotiate better pays and others; but is not doing the job the credit unions in the U.S. are doing.
Regards, Godfrey Obua.

Photo of Wingee Sin
Team

Yes, quite different in America I am afraid.  I am from Hong Kong and US, and my two origins are quite different in their savings culture and longevity perspective.  

In Hong Kong, and in Asia for the most part, there is quite a strong savings culture.  I would characterize savings as social norm that most people have.  It is also more common for multiple generation of family to reside together - and as such, the role of 50+ (elderhood, if you will) typically is to be caretaker of grandchildren in the family.  This naturally creates jobs for elders, and as a result, there is less challenge to the financial security of elderly.  Further, there is also universal healthcare, senior discounts for basic needs (food, restaurant, transportation, housing).  So it is in fact a system that serves many reasonably.  (I am highly generalizing, but overall I think there is a reasonable safety net for elders. )
 
In the US, what I have found is that savings is much more of a market norm.  People who save are doing it as part of financial planning, investment, and growing wealth.  Rarely, do people save because they feel that is what others are doing! Further, in the US, the family relations are different, and it's not that common for multiple generation to reside together.  One of the top concerns for most elders in the US tends to be independence, don't want to be a burden to family.  As a result, financial independence and ways of making a living at later stages in life is more important.

Photo of Obua Godfrey
Team

Thank you wingee sin,

It is interesting, but what I can learn from the both of them are caring for the future, because in our case, people save through assets, although of different kinds, ranging from movable like cash, motor vehicles, livestock, among others and in movables like houses, land and others.

We also have a culture of keeping grandchildren, or extended families, but one has to be financially stable, by having saved something earlier on or own assets to make it easy, and in addition, those assets remain for the children and grandchildren when their grandparents die.

Our economy is yet developing, we also have some old age pension scheme, for those 65 above. So this is also good, but the money is little.I think the best is for one to join a credit union like in US as early as possible, just like as one starts to save in the bank account from youthful ages. So you remain safe when aging up. And for withdrawal, the credit unions, can also use the common Automated Teller Machines, located all over the regions where their customers are, so they can use ATM cards to have their money when they need it.


Thank you,

Godfrey Obua

Photo of OpenIDEO
Team

Congrats on this being today's Featured Contribution!

Photo of Wingee Sin
Team

Thanks OpenIDEO!

Photo of Kate Rushton
Team

Hi Wingee!

It is great to see you in the ideas part of the challenge. I like that you have focused on the disbursement side of the pension. One that a few people have highlighted as a challenge for them. 

When I read your idea, I thought of this post - https://challenges.openideo.com/challenge/financial-longevity/research/united-income in the research phase. It might give you a few ideas to push your idea further. 

Have you seen Dave Krimm post - https://challenges.openideo.com/challenge/financial-longevity/research/suspend-rmds-while-working ? 

"Currently the IRS requires minimum distributions from retirement accounts after the participant reaches age 70." 

Are there any other restrictions that we need to be aware of (similar to this one) that would affect disbursement and/or your 'personal pension' idea?

I can't wait to see what the opinion is of credit union employees. 

Photo of Wingee Sin
Team

Thank you Kate! Yes I am familiar with United Income, and Matt and his team's great work! ;)
This idea is similar in the sense of focusing on distribution, but the distinction is on leveraging the distribution, scale, and nonprofit nature of the credit union network.

Do let me know if there are any others I can collaborate with! It would be great to collaborate with a few other ideas! 

Photo of Evelyn Ihrke
Team

Wingee:

Great idea... Incremental, consistent savings are vital to accumulating- anything and everything! My accounts are through FCUs because the money generally stays local, and their fees for many of ATMs are waived. My thought would be to have individual options for stock or bond purchases rather than mutual fund accounts to choose from.  
Last month while trying to move a wire transfer from my broker to my FCU account I learned that FCUs generally have parent layers for transfers and other banking mechanisms (borrowing, credit cards, etc. I expect)... This would be something to consider in possible collaborations with brokerages, etc.. I was actually wondering at the time why we couldn't move our money into a PayPal type account- but I suppose that some entities still like to see that paper check. 

Photo of Wingee Sin
Team

Thanks Evelyn! And I really like this idea of thinking about payments and layers of transfer into personal pension. Any reasons why you are interested in the option for stock or bond purchase? I ask as individual stocks and bonds tends to be more risky, and I wonder if that is prudent in the context of a pension (something you want stability in income).  Thanks!