Keep in mind the member impact of pension changes

The March edition of Pensions Expert hits the shelves tomorrow, and several stories in this month’s magazine remind us of the people behind the headlines. Debate is raging, for example, about what can be done for the thousands of members who erroneously transferred out of the defined benefit British Steel Pension Scheme.

Then there is the continuing furore over the quality of administration services at many UK schemes. Administration is low-margin work, less glamorous than racier services like consulting and asset management, and as such is often relegated in terms of importance.

Our story ondoctors’ frustrations with their pension arrangements shows that this under-investment cannot go on.

NHS staff’s most vocal complaint is arguably that the government’s complex tax rules deter them from propping up our country’s health system – but the common denominator is opacity, confusion and a lack of help being given to members struggling with some of the most important issues in their financial lives.

Remembering the impact we have on ordinary people should be a big driver for trustees and administrators to put a limit on the admin industry’s obsession with cutting costs – running cut-price schemes necessarily means a loss of service. Look out for our cover feature on the topic, published this week

Sometimes the industry will have to push ahead with changes that members do not like. Eminently sensible reforms – such as the Pensions Regulator’s insistence that schemes stop relying on the assumption that their sponsors will still be around in a decade’s time – can have unpalatable human consequences.

One such consequence is increased cost and scheme closure. Josephine Cumbo’s thought-provoking column on the Universities Superannuation Scheme explores the regulatory dilemma between protecting members’ accrued benefits by insisting that sponsors and trustees take less risk in their investments, and protecting members’ future accrual by allowing them to seek returns instead of demanding contributions.

As Josephine rightly points out, the key party protected by increasing regulation in the first instance is the Pension Protection Fund. But then again the lifeboat’s primary function does what it says on the tin – it protects members’ pensions and its longevity is of vital importance.

What to do then? Josephine’s column identifies one key remedy in transparency, a cause interestingly also taken up by the Pension and Lifetime Savings Association chair Richard Butcher, who says we have a responsibility to restore trust in pensions.

Regulators, trustees and employers might rightly continue to remove risk from pensions, but they had better be able to show their working and answer these tough questions, or we risk widening the trust deficit even further.

Anyone working in the pensions industry knows it is a force for good in the world. Pension funds are holding companies to account, creating social impact by building housing in their local areas, and helping build the infrastructure our country needs.

The challenge we face is how to communicate this to the outside world.