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Engaging with the ‘new normal’
16 July 2021

Engaging with the ‘new normal’

I am sitting in the sun at my favourite café writing this piece. Finally, life’s getting back to normal. Despite the changes wrought by COVID-19, there are some constants. For example, the Financial Conduct Authority (FCA) is still on a mission to ensure that the boundaries of advice and guidance are well defined. It recently joined forces with The Pensions Regulator (TPR) to publish some dos and don’ts in this area. The aim is to give clarity to trustees on what they can and can’t do in terms of providing guidance and support around financial decision-making.

One unexpected outcome is the recommendation that transfer values (TVs)should not be supplied unsolicited. Many schemes routinely add TVs to benefitstatements or retirement packs.

Numbers game

The rationale is that showing a member a big number could have them running to a financial adviser. The recommendations go on to say that schemes can continue to show TVs, but only if they include information and context around the figures, and what they might achieve. For example, the context should help the pension savers understand how long they might live and, therefore, how long the TV would need to last.

This takes us neatly into how to support member financial decision-making. As a starting point, we need to consider a few important facts:

  • The average UK reading age is 12
  • People increasingly consume information online
  • COVID-19 has driven people to online services and after the pandemic, many will stay there.

The pensions industry, and in particular the defined benefits model, has so far failed to deliver a modern retail experience that can both educate and inform pension savers.

Rock, paper, scissors

Let’s jump back to the TV piece for a minute. There’s a limit to what you can do on paper in terms of educational content. The process of paper statements is not interactive, not intuitive, not agile and not reallyfit for purpose. Perhaps it’s time to use the scissors?

Pension savers can get to that content online much more easily than you might think. QR codes are now a part of daily life. So, put a code beside the TV and take the saver to an educational site with animations and information. Maybe even include a link to the Government’s life expectancy calculator so people can see for themselves how long they might live.

Even so, where advice is a legal requirement for TVs larger than £30,000, there are limits to what can be achieved through information and guidance. Finding specialist financial advice which can be trusted and is affordable can be a problem.

The transfer advice market has contracted dramatically over the last few years, but there are specialist firms out there offering full advice for a reasonable fixed fee. The FCA recently banned something called contingent charging. Put simply, you would only be charged if the adviser recommended a transfer. What could possibly go wrong with that?

In its place, they have introduced a new form of advice called abridged. It’s still full advice, but potentially more affordable.

If paper put pension savers between the rock and the hard place, digital solutions can help them better understand their options, provide easy to access, well signposted guidance, and point them in the direction of any advice they might need. It’s the ‘new normal!

This article was featured in Pensions Aspects magazine July/Aug edition
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Last update: 15 July 2021

 Graeme Riddoch
Graeme Riddoch
Spence & Partners
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