Defined benefit schemes need to do more to support members with freedom and choice
Trustees who believe it is safer to do nothing than to support members with communication around freedom and choice are “living in a fairytale,” according to Carolyn Saunders, partner at law firm Pinsent Masons.
Her response reflects consultant Hymans Robertson’s statistic that 88 per cent of defined benefit trustees believe they should be doing more to communicate with members around retirement choices post-55.
“The pension landscape has changed unrecognisably over the last number of years and the real risks now lie in inaction,” she added.
“It is time for trustees to stop feeling like it is ‘untrustee-like’ to make members aware of the options that they have on retirement,” agreed Janine Wood, independent trustee at ITS Limited. “I would not like to be the trustee who takes a phone call from a dependant where the member had died shortly into retirement, challenging the lack of information they had received when making their retirement decisions.”
While scheme members can get advice themselves in the retail market, Jamie Barnes, head of sales, EBCs and corporate partnership at insurance providers LV= Corporate Solutions, pointed out that ”members are faced with more complex decisions and are increasingly turning to their employer and trustees for support. Employers and trustees can make sure their members receive quality advice by putting specific advice solutions in place, with due diligence on the adviser.”
Commenting on the statistic, which came from trustees responding to a webinar question around ‘freedom and choice’ communications, Ryan Markham, senior consulting actuary at Hymans Robertson said: “Having made ‘flexibility’ a possibility through rule amendments, schemes now have a responsibility to make sure those flexibilities are communicated properly.” He warned that not doing so risks a repeat of problems in the impaired life market where “the regulator imposed fines on insurers for not providing ‘sufficient information’ for retirees to make an informed choice. Although it is still early days, the parallels are clear.”