• 95% of pension scheme trustees are concerned about inadequate support for members
• Only a third of trustees see it as their role to provide this support
• Nearly half of sponsors think the individual member should take responsibility
• Only a quarter of sponsors see it as their job to support employees in pension choices

Greater regulatory clarity is needed on pensions transfers as there is still too much industry confusion, claims Hymans Robertson, as a result of research it has conducted.  Almost all pension scheme trustees (95%) are concerned about the consequences of their members getting inadequate support for their retirement choices, but only a third see this as part of their role, according to a the survey from the leading, independent pensions and risk consultancy.

The survey reveals (see figure 1) that there is clear confusion about where the responsibility for education and support on member retirement options should lie. While a third of trustees believe they are responsible, a significant number believe it should be down to the individual. Nearly half of scheme sponsors agree that the individual should take responsibility, yet, only a quarter believe that the role should fall to them.  

Ryan Markham, Partner and Head of Member Options at Hymans Robertson explains further:

“There is a deep confusion amongst both trustees and scheme sponsors about whose door this responsibility for education and support on member choices falls. This creates apprehension around proactively offering members a clear, unbiased explanation of their retirement choices and access to good support to make an informed decision. In light of this, we would welcome a statement from the industry regulator to provide further clarity. Such a statement could give trustees greater re-assurance that they are not overstepping the mark and would give greater confidence to all parties in their decision making.

“Adopting a passive approach towards members can expose the scheme to the “why didn’t you tell me?” risk as members take potentially inappropriate but irreversible and life-changing decisions. However, simple steps such as improving the communications strategy, making members aware of their choices far earlier in the process, and facilitating quality financial advice can go a long way in mitigating this risk and improving member outcomes.

“Scheme trustees and sponsors need to wake up to the fact that the pensions landscape has changed almost beyond recognition over the last few years. Those who fail to support member decision making now risk a mis-selling scandal as big as the high-profile cases of the past. The findings of the British Steel case highlight the reality and significance of this risk and the need to support members in a better way.

“It’s clear that pension freedoms are enabling members to access their benefits more flexibly. All the evidence suggests that the number choosing to ‘cash-in’ their final salary pension is soaring. Over the last six months we have seen a three-fold increase in requests for transfer values and actual transfers out have quadrupled across our client base compared to pre-April 2015 levels. Trustees should take this as a wake-up call for action as it becomes clearer that doing nothing is no longer an option.”