Emily Forrest, a partner at law firm Sackers, explains why it is vital Joe Bloggs can understand pensions
Hurrying across town in a taxi last week, I made the old error of admitting to my cabbie what I do for a living. “Pensions?” he chuckled, turning round to look at what kind of a person would dedicate her career to such a thing, “In that case, I’ve got a question for you.”
It turned out that Her Indoors had recently received a bewildering wodge of materials from her pension provider, telling her that she can now do a load of things with her pension that she has not been able to do before. “What’s that all about then?” my driver asked.
As we ducked in and out of the traffic, I started giving a sort of Reduced Shakespeare Company version of the pensions story so far, building up to the unexpected denouement that was the 2014 budget changes.
I tried to keep the picture simple, but my cabbie was full of questions. Valid, urgent questions. As the last few minutes of our journey closed in, I strived to reduce the April changes to their essence, without – heaven forbid – providing anything resembling advice.
The dash to King’s Cross had become a metaphor for the challenge faced by our industry in communicating with members about the new DC flexibilities. Short, punchy, easy-to-follow communications take time to craft - time which was in short supply on my journey; and was in short supply for the industry as April loomed and the DWP, HMRC, FCA, TPR and Pension Wise all worked round the clock to deliver their bits of the jigsaw.
Now that the disclosure requirements and regulatory recommendations are known (at least for now), it is time to take stock. Yes, the need to comply is already upon us. But rather than issue members with reams of bumpf, schemes need to invest time – now, and urgently – in getting these communications right.
For occupational scheme trustees, the priority in tackling member communications is to know which, if any, of the benefits in their scheme are in scope for the new flexibilities.
For most schemes this should be obvious – core DC or cash balance benefits, or just DC AVCs. Where benefits do not fall within scope, or where schemes with DC elements do not offer members the full range of flexibilities, the focus of the communications is likely to be on transfers out.
Compliance with the new communication requirements in relation to flexible access and/or transfers is a must. So too is knowing the limits of what you can and cannot say to members in a non-FCA regulated setting.
But just as crucial is to make sure that what members get in their inbox, or on their doormat, is something which Joe Bloggs stands a decent chance of being able to decipher.
Schemes and their administrators are currently under immense pressure to review all their standard letters, as well as produce brand new materials to be provided at the new trigger points. Keeping sight of the “Joe Bloggs test” is vital to make sure all that work does not go to waste.
So, if you are involved in preparing communications aimed at informing members about the new DC flexibilities, do those members a favour: hand a draft to someone who has nothing to do with pensions. You know - a “normal” person. Ask them to read it.
Only if that normal person can explain back to you what they are being offered; when this will apply to them; what they need to do next; and where they should turn for help – should any of us allow those communications out of the door.
“In a recent Sackers survey of more than 50 of the UK’s top pension schemes, more than 85% of respondents stated that they see member communications as the greatest challenge for their schemes in 2015.”
Emily Forrest is a partner at pensions law firm Sackers