COVID-19 is causing market volatility and uncertainty for businesses which means savers are at risk of making choices which could have serious long-term consequences for them and their families.
We have been regularly updating our guidance so that trustees have the tools and information they need to safeguard savers’ retirements.
In some of our recently published guidance, we called on trustees to send warning letters to savers who ask to transfer retirement funds. The letters urge savers to carefully consider the implications of transferring their pension.
We have provided a template letter for trustees to send to savers asking to transfer from a Defined Benefit (DB) scheme to a Defined Contribution (DC) scheme. The letters highlight that transferring from DB to DC is unlikely to be in their best interest.
The letter is signed by TPR, the Financial Conduct Authority and the Money and Pensions Service, which runs The Pensions Advisory Service and is available https://www.thepensionsregulator. gov.uk/en/covid-19-coronavirus-what-you-need-to-consider/ communicating-to-members-during-covid-19
As well as directing trustees to send warning letters about transfers, the guidance helps schemes and employers to deal with emerging risks through a number of other measures.
The guidance prompts trustees to directed members to free impartial pensions guidance from Pension Wise which offers phone appointments and online information. Members should also be encouraged to take regulated advice to understand their retirement options. In addition, trustees should also identify increased risks in how a member has decided to access their pension funds and give appropriate warnings of the risks and implications of their chosen option.
Schemes should also monitor cash equivalent transfer value (CETV) requests and inform the FCA of unusual or concerning patterns, such as spikes or the same adviser cross a multitude of requests.
Pension scams are devastating. The most recent figures show that victims of pension fraud lost on average £82,000; for some their entire life savings.
Trustees are the first line of defence in protecting retirement funds and have a key role in ensuring members make informed choices.
To guard against scammers, TPR has urged trustees to follow the Pension Scams Industry Group (PSIG) code of good practice.
The PSIG guide has practical steps for carrying out due diligence and assessing transfer requests, and example letters for communicating with members throughout the transfer process.
Additionally, trustees should direct their customers to the ScamSmart website to learn how to protect themselves from pensions scams.
Annual Funding statement
It is clear that COVID-19 is testing employers and trustees like never before. Therefore, it is vital that they work together to manage the effects of the pandemic with a focus on long-term planning and risk management to protect savers.
We are clear that the best support for a pension scheme is a strong employer and so we are here to support both groups in our role to ensure savers’ retirements are protected.
Our recently published Annual Funding Statement (AFS) sets out what we expect of employers and trustees and how we are supporting them.
The AFS outlines how DB schemes should approach forthcoming scheme valuations. The guidance in the statement highlights how schemes can balance the impact on employers while putting them in a stronger position to improve their funding positions.
The guidance deals with key issues in connection with covenant assessments and affordability, scheme funding positions and designing recovery plans.
Helping savers to make the best financial decisions, together with giving trustees the support they need to safeguard pensions, will help ensure that the retirement outcome for millions of savers is protected as we face the tough times ahead.
This article was featured in Pensions Aspects magazine June 2020 edition.
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