Pension plan trustees facing engagement dilemma

Pension plan trustees are continuing to face a dilemma over how engaged they should be in ensuring members get the right advice about whether to transfer, according to a new report jointly published by Royal London and Eversheds Sutherland.

The report suggests that not helping members to access high quality impartial advice can have reputational consequences for trustees and employers, and devastating consequences for members.

Between the introduction of pension freedoms in April 2015 and September 2018, according to FCA figures, there were more than 230,000 members of Defined Benefit pension plans who received advice on whether to transfer their benefits – with an average transfer value of £350,000.

Royal London indicated the new analysis is seeking to provide guidance to trustees on the issue, setting out a ‘roadmap’ of engagement by trustees – ranging from minimal involvement, such as simply signposting members to third party guidance websites or adviser directories, to a ‘gold standard’ of appointing nominated IFAs for members to use if they wish.

The insurer added this would also ensure the ongoing supervision of the performance of IFAs.

Royal London director of policy, Steve Webb, commented: “Despite all of the controversy around this issue, it remains the case that transferring out of a Defined Benefit pension will be the right answer for some people in some circumstances.

“There is much to be said for trustees helping members to access high quality, affordable financial advice to help them to decide if such a transfer is right for them.”

The new report also provides help for trustees in selecting an IFA firm, with a list of questions for trustees to ask of advice firms seeking to be appointed.

Eversheds Sutherland head of pensions, Francois Barker, added: “When it comes to trustees and pension transfers, there is no ‘risk-free’ response.

“Trustees who engage with the issue in a properly governed way may well be less exposed than those who do nothing at all.

“Whilst there is no one-size-fits-all solution to this dilemma, we hope that this guide will help trustees to judge the right level of involvement in supporting members who may be considering a transfer.”

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