Time to get creative with member communication
Editorial: In the UK, adults are more likely to be a victim of fraud than any other crime type. In the past four years, fraud made up almost one-third of total crime, according to the Crime Survey for England and Wales.
Speaking specifically about pensions, data from the Financial Conduct Authority and the Pensions Regulator show that victims of scams lost an average of £82,000 to tricksters in 2018. This figure corresponds to 22 years’ worth of savings evaporating within 24 hours.
The true reality of the numbers could be even worse, with Margaret Snowdon, chair of the Pension Scams Industry Group, repeatedly stating over the past years that the scale of pension scams is unknown. She estimated that more than £1bn has been lost to con artists and fraudsters, frittering away people’s long-term savings.
Savers who were wrongly led to transfer out of their gold-plated final salary plans are pointing the finger at the administrators who allowed their pension transfer to go through
While none of this is new information – the advent of pension freedoms and an exponential rise in transfer values have led to a race for savers to cash out their defined benefit pensions – trustees are now seeing a new threat coming to the fore.
Savers who were wrongly led to transfer out of their gold-plated final salary plans are pointing the finger at the pension scheme officials and administrators who allowed their pension transfer to go through.
As our cover feature explains, in two recent cases the Pensions Ombudsman ordered public sector schemes to reinstate the scammed savers, as it concluded that trustees did not conduct enough due diligence.
Detailed considerations such as the location of the receiving scheme sponsor are now fair game when judging trustee efforts. The level of checks undertaken – clearly not enough by today’s standards – is also fully analysed, with the benefit of hindsight.
Should trustees be worried? I think so. As Ms Snowdon tells Pensions Expert, claims management companies are filling up the airwaves with adverts asking for individuals to come forward. They are specifically focusing on former members who transferred out in 2013-14, when the Scorpion leaflet was introduced.
Even if these complaints do not reach the ombudsman and are resolved through internal procedures, trustees will have to robustly prove that they took all the right steps when assessing a transfer request.
At the end of the day, all DB members have a statutory right to transfer out. Legislation gives them that power.
In some cases, it might be a daft idea; in others, it will be justified. Trustees can only make sure that they are following the latest code of practice and make their processes as airtight as possible. However, I do not think that trustees’ responsibility stops there.
If so many schemes have a paternalistic view of what is best for their members, why not apply that to scheme communications and member education as well?
The fact that the regulator publishes materials that trustees need to send to members asking for a pension transfer value does not stop schemes from increasing awareness on the topic.
We all get documents from our pension providers that end up in a drawer or in the bin, but why not think creatively? Why not try engagement through social media, or a new way of communicating with your members?
DB schemes are becoming something from the past, as most of them are closed, and a great number of them are thinking about endgame solutions. But until then, why not improve your members’ life the best you can? It will probably save you some headaches in the future.