Regulation is required to settle trustees and sponsors’ “deep confusion” regarding their pension transfer duties, Hymans Robertson has said.
According to a recent survey by the consultancy firm, trustees and scheme sponsors are unclear on their remit around providing support for scheme members on pension transfers.
The survey highlighted that 95 per cent of scheme trustees are concerned about the consequences of their members receiving inadequate support for their retirement choices, and only a third of trustees consider the provision of support as part of their role.
Hymans Robertson noted that its survey illustrated that there is “clear confusion about where the responsibility for education and support on member retirement options should lie”. It added that the largest number of sponsors questioned thought it is the duty of the individual to take responsibility for their choices and only a quarter of respondents believe that it is their duty.
The lowest proportion of respondents said the government should hold responsibility for educating members on their retirement options and the smallest group of trustees and independent trustees admitted to not being aware of who should be responsible.
Hymans Robertson partner and head of member options Ryan Markham said: “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.”
Concluding, Markham warned the trustees and sponsors need to be aware that the changing pensions landscape requires greater support from their members. If these duties are neglected, they are at risk of mis-selling scandals like the high-profile cases in the last few years, he warned. “Trustees should take this as a wake-up call for action as it becomes clearer that doing nothing is no longer an option.”