Until recently, a pension was probably something most of your members wouldn’t have thought too hard about. However, many may now be looking at their pension in these times of uncertainty and asking themselves “is it safe?”, “should I move it somewhere else or start to draw on it?”, and “can I afford to keep paying in?”.
Given these searching questions – and the increased risk of scammers looking to take advantage of people at their most vulnerable – clear, informative, and reassuring member communications are as important now as they have ever been. They should help to put members’ minds at ease and to stop them potentially making ill-informed and irreversible decisions that they may later regret.
To reinforce this message, The Pensions Regulator (TPR) published guidance on 29 April for trustees and administrators of Defined Benefit (DB) and Defined Contribution (DC) pension schemes on communicating with members during the Covid-19 outbreak.
The headline from TPR’s guidance is the letter it is asking all DB pension scheme trustees to send to any member who enquires about a transfer. The main message in the letter is to warn that a transfer is unlikely to be in a member’s best long-term interests – a strong message to be putting out there! We shouldn’t however miss the other points being made by TPR.
But isn’t a lot of what is being said just good practice?
In short, yes; and we touched on some of these areas in our recent blog, What trustees should expect from their administrator during the Covid-19 crisis, particularly on proactively looking to reassure members and signposting them to Covid-19 related material produced by the likes of The Pensions Advisory Service.
Indeed, most of the points TPR makes are the good things many of us will have been doing well before all of this. So, what else is TPR saying and what should trustees and their administrators continue to do?
1. Effectively manage members’ expectations
Continue to let members know where there might be delays in processing their requests, and if possible, how long they may be. This will be particularly relevant now for trustees who have put a pause on issuing DB transfer values where a letter explaining the reasons why and when they might resume could help put minds at ease.
2. Get members to think hard about their options
- As well as signposting to the usual government-backed bodies and materials, encourage members to consider taking advice before coming to decisions about their pension savings. When doing so, highlight the questions provided by the FCA that they might want to ask their adviser and if they’re looking at a transfer, give them details about the Pension Transfer Gold Standard;
- Provide as much information upfront on benefits, options, and any special protections that’ll be given up if a member chooses to do one thing over another, especially now where they may be looking to transfer, opt-out, or retire, when they wouldn’t otherwise have done so;
- Consider whether additional targeted communications would be helpful, particularly for members with DC pension savings who could be concerned about recent market volatility and whether to change the amount of their contributions, make investment switches, or take their benefits; and
- Reinforce the message that pensions are generally a safe long-term investment and that decisions based on short-term events and circumstances can have lasting consequences on financial wellbeing and retirement plans. The recently published “Covid-19 and your pension; Where to get help” can help with this message.
3. Help protect members from transfer scams – from behind the scenes
- Monitor transfer requests – perhaps more frequently now – for unusual or concerning patterns such as an uptick in numbers or the same advisers targeting a group of members; and
- Follow best industry practice produced by respected sources such as TPR, the Pension Scams Industry Group, and the Pensions Administration Standards Association on processing transfers and preventing scams, ideally having a group of ‘transfer specialists’ who focus on this type of work.
It’s good to see TPR taking such a member focused approach in its recent guidance. Whilst there is a lot of information in there, trustees and administrators should be reassured that most of what is being said will already be well established within their communications and in most cases exceed what TPR expects.
The guidance also serves as a timely reminder that trustees and their administrators are the first line of defence in protecting members’ pension savings. We should continually monitor how we are communicating with members and dealing with their requests to help them make well informed decisions and hopefully, not ones they’ll later regret.