Trustees should up their game when it comes to contingency planning and member communications, as 90 per cent of schemes that have entered assessment at the pensions lifeboat fund could be better prepared, writes Helen Beckinsale, panel service manager at the Pension Protection Fund.
Savers have become increasingly concerned about the state of their finances, which has been met with ever-growing support and guidance from across the pensions industry.
It is yet to be seen what a recovery will look like in the UK but, as the debate around security and sustainability of pension savings continues, the Pension Protection Fund has placed an even greater importance on industry collaboration and engagement between savers, providers and employers.
For employers and trustees of defined benefit schemes, it is a crucial time to reassure their members that their pension pots are safe if the worst happens.
Communication is critical in pandemic times
Research from YouGov shows that a third of people do not have complete trust in pensions. It is therefore critical for employers and trustees to communicate and provide reassurance as the economic impact of Covid-19 begins to unfold, and incentivise and guide savers to plan effectively for their retirement.
We urge trustees to engage with us early on, irrespective of the risk of insolvency, as proper contingency planning can make a real difference to the member journey
Questions about physical, emotional and financial wellbeing will be front of mind for employees, and concerns about their financial future will play a strong part of this.
To support workplace education, we have developed a pensions guide in collaboration with six other pension bodies that sets out all the various protections and advice that exist for all UK pension savers.
The guide also answers commonly asked questions raised by scheme members since the beginning of the lockdown, and provides employers and trustees alike with all the information they need in one place — whether they are running a DB or defined contribution pension scheme.
Communication and providing reassurance to members will become even more important as companies set off on the road to recovery, which for some may include the prospect of a restructuring or insolvency event against the backdrop of a challenging economic environment.
Trustees need to better prepare for the worst
For trustees, we provide support through our contingency planning guidance, along with expert advice from our trustee and support services panel that aims to improve the member and trustee experience when an employer is in difficulty.
Running a pension scheme can be challenging, and our guidance is a useful tool that will help trustees prepare for both pre- and post-insolvency situations.
It is designed so that trustees can effectively protect members by managing risks and ensure they are better prepared if a situation arises where a scheme has to enter the PPF assessment period.
In these unsettling times, the advice and tips in our guidance is essential in supporting how trustees plan for companies that are in a robust position or those on the brink of collapse.
The simple but effective contingency planning steps we recommend place focus on areas that impact members. The guidance is complete with a checklist, which ensures trustees have the right measures in place to support their members and reassure them that their pension is safe in such difficult times.
In our experience, 90 per cent of schemes entering assessment could have been better prepared. This is why we urge trustees to engage with us early on, irrespective of the risk of insolvency, as proper contingency planning can make a real difference to the member journey.
Effective member communications and raising awareness of the protections that exist to protect UK pension savers is critical so that members can make informed decisions and feel assured about their financial futures during these difficult times.
Critically, pension awareness may also prevent members from falling victim to pension scams, which could see them lose all their retirement savings. Pensions Awareness Live this week offers an opportune moment to stop and consider this.
We believe the member journey — from awareness to understanding and reassurance — should be at the heart of the industry, not just this week and not just during Covid-19, but it should be a continuous and ongoing long-term priority through the good times and the bad.
Helen Beckinsale is panel service manager at the Pension Protection Fund
