9th June, 2020
Financial markets in freefall (albeit starting to recover now) and headlines of impending economic doom inevitably result in pension scheme members worrying about their retirement future.
Too often, members have very little interest or knowledge of how and where their pension savings are invested. That lack of engagement is, in itself, a much wider industry issue that needs addressed.
But for now, it means that the majority of members will be wondering if their pensions have been affected by the COVID-19 crisis.
What should trustees be doing?
Trustees should have an open door to their members at all times, and should be communicating regularly. Right now, silence is most certainly not golden; in fact, it’s potentially very dangerous as people have a tendency to fill in the gaps themselves. And scammers are very good at exploiting misunderstanding and misinformation.
So, trustees should take the lead, reach out to their members and give them the confidence that their scheme is being well governed and in good hands. Often a Q&A is an ideal method of providing both information and reassurance. Provided the questions and answers are relevant to the audience and scheme type.
- For a defined benefit scheme, stress from the outset that pensions will continue to be paid as normal, and that any income from this type of scheme, whether it is being paid now or in the future, is not directly affected by falling stock markets.
For those members who may worry about the scheme’s overall funding, remind them that investments are made with a view to long-term growth and falls in value are expected from time to time. Keep it short and to the point, avoiding technical pensions and investment language.
Tell members up front if administration services are affected in any way due to the crisis and if the priority is paying current pensions on time. Members are more likely to accept delays in dealing with requests such as transfers and general enquiries if they understand that the focus is on looking after the wellbeing of everyone involved in running the scheme.
- For a defined contribution scheme (including AVCs) trustees can point to the fact that major stock markets are already showing signs of recovery. Also, most DC pots will be invested in a wide range of assets, not just stocks and shares. Many members close to retirement are likely to be in lifestyle funds and so be less affected by falling share markets. Members who are far away from retirement will have a longer time to recover any short-term losses.
A popular message right now, and one which trustees might want to apply to the danger of scams. The scheme administrators will have measures in place to combat pension scams – but it still could be you!
Times of crisis are perfect for scammers – they dine out on uncertainty. So it’s vital that trustees keep reminding members of the four steps they can take to protect themselves:
- Reject unexpected offers
- Check who you’re dealing with
- Don’t be rushed or pressured
- Get impartial information and advice
Point them in the direction of the ScamSmart website www.fca.org.uk/scamsmart/how-avoid-pension-scams and Action Fraud on 0300 123 2040.
COVID-19 and your pension: Where to get help
Trustees should note that that six major UK pension bodies (FCA, FSCS, MaPS, PPF, Pensions Ombudsman and The Pensions Regulator) have collaborated on a new publication to answer key questions and provide important advice – ‘COVID-19 and your pension: Where to get help’.
It can be downloaded from www.fscs.org.uk/globalassets/pdfs/covid-19-and-your-pension.pdf
The guide covers issues such as pension contributions in furlough, PPF protection, pension scams and transfers.