Lack of DB pension member knowledge prompts scam concerns

Just over a quarter (27 per cent) of defined benefit (DB) pension members feel very confident about making retirement decisions, whilst over a third admitted that they do not feel knowledgeable about their DB pension, according to industry research.

The survey, from Hymans Robertson and Like Minds, also found that nearly half (47 per cent) of the respondents would welcome more support on what options are available to them, with just 21 per cent believing that they already have an adequate level of support.

The companies argued that the combination of a lack of knowledge and confidence, alongside the challenging financial circumstances stemming from the pandemic, are putting an increasing number of members at risk of falling foul to intensified scamming.

It also highlighted the findings as an “important reminder” for trustees and employers, emphasising the need to review what they currently provide to engage and support members, and “crucially” to establish if they need to do more to help members.

Commenting on the findings, Hymans Robertson head of member options, Ryan Markham, said: “Over the last 12 months we have seen a vast increase in financial fraud with scammers taking advantage of people being isolated at home with a much-increased reliance on technology.

“With many DB members struggling to get the information and support they need to really understand their options this has been a prime breeding ground for unscrupulous conmen.

“The combination of large sums of money, and in some cases a lack of technological understanding, has increased the susceptibility of many in DB pensions."

In light of this, Markham highlighted The Pensions Regulator's recent pledge to combat pension scams, arguing that it is "vital" that trustees and employers consider their member engagement and support strategy.

He continued: “They have a moral responsibility to step up and ensure that their engagement strategy is fit for purpose having actually thought through what members really need to make well informed and life changing decisions.

“Without this there is a real risk that member outcomes suffer needlessly in the hands of ever more sophisticated financial scammers or through members making inappropriate short-term financial decisions.

“This could be storing up risk and challenge for trustees and employers as members later seek to blame someone for these poor outcomes.”

Like Minds director, Nick Throp, added: “The truth is that a lot of DB communication has been driven by a requirement to communicate rather than being truly member-centric and understanding what members need. Many DB pension schemes are still stuck in the digital dark ages.

“Covid-19 has highlighted this DB digital deficit even more. Proactively helping members understand what they have, its value and embedding support and guidance into the engagement process will protect members better.”

The findings also follow analysis of recent Financial Conduct Authority data, which has also prompted calls for more scrutiny over the effectiveness of pension communications.

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