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Why we must rethink our service to deferred members

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PASA’s Geraldine Brassett encourages trustees not to wait for legislative change and to take steps to improve data records and communications with all members regardless of status.

I have been involved in pension administration for many years and as an industry, we accommodate change after change. Often, through necessity, this is reactive as a consequence of our changing legislative landscape - either directly because the law requires us to do things differently, or because changes cause our scheme members to have different needs and expectations. 

Perhaps now is the time to review where we are, as well as how our services and the way we work with stakeholders needs to change. We see a lot of coverage about engagement with DC members but often, DB deferred members are the population that causes challenges for schemes.

The rise in CETV requests we saw post the introduction of freedom and choice was not a spike – we know this now for certain. These transfers are frequently taking place at or close to retirement, so timely provision of CETV information to both members and IFAs is important. CETV calculations are often completed using a standalone modeller provided by the scheme actuary which limits the ability to provide this information cost effectively on retirement quotes, deferred benefit statements and online. Perhaps now is the time to start automating this transaction to improve the service to members whilst managing costs.

The assumption regarding the number of CETV calculations and transactions made in the administration fees may no longer be appropriate, the cost per transaction will likely have risen as a consequence of the need to provide information to IFAs, and it is possible that the SLAs approach to cashflow and reporting may also need review.

Governance in relation to the management of records for DB deferreds also needs to be reviewed and there are a number of aspects to this.

De-risking activities are still high on the agenda for many trustee bodies and the quality of the data for DB deferreds can be a challenge. Common data is typically now much improved (recognising that there will always be members we lost track of despite best efforts) but the full extent of any deficiencies in scheme specific data often do not actually become apparent until there is a need to undertake an exercise, whether for de-risking or compliance.

Sometimes the simplest things are overlooked or not deemed important, such as the active management of the deferred population who have past their NRA.  Do trustees always know how many members are in this situation, plus why and what they should do about them? Do administrators need to provide more visibility of this group?

Online services have traditionally been seen as important to active members of schemes and increasingly this is used for online payslips for pensioners, but could this also help with deferred members? Whilst it is important to evidence the return on any investment - whether that is in terms of soft or hard benefits - we already know that this can support members in making retirement choices, but there are other potential benefits. Some of these are as straightforward as staying in touch with members (we are less likely to change our email address than our postal address), but there is also opportunity to use this for data cleansing and de-risking exercises. Changes
In any event it is increasingly likely that at some point, we will have to give DB deferred members access to their information, at some level, via the Pensions Dashboard. So as a minimum, we need to make sure we understand the position now and how any data deficiencies impact on compliance, governance, member engagement and cost-effective administration.

This need to adapt to change is going to continue and in time, our administration services, the way we deliver those services and our contractual and governance model will need to reflect those changes. Engagement with key stakeholders – deferreds included - will be vital if we are to ensure alignment with objectives and strategy for all members in the schemes we are responsible for.

Geraldine Brassett, Chair of PASA’s Industry Policy Committee, GMP Working Group and Pensions Dashboard Working Group