Two important pension crisis measures to help protect consumers and improve records:
- Stop all pension transfers for six months.
- Ensure pension administrators start to reconcile records, cleanse and validate data to improve accuracy of pension information.
These two emergency measures are designed to stabilise pension schemes, avoid further losses to scammers and improve the reliability of pension data, so that accurate past records and a reliable dashboard will be more quickly and readily achieved.
Put All Pension Transfers on hold for, say, 6 months: In the current market turmoil, it is impossible for trustees of pension schemes to be sure of the underlying value of the pension funds, or each individual’s share. Recently calculated CETVs (Cash Equivalent Transfer Values), or fund values that were produced a few days ago, could be significantly inaccurate, due to the wild market movements during the coronavirus panic. It is not clear where markets may settle, or what long-term interest rates will be in coming weeks or months. Pension scheme trustees and IGCs will be struggling to understand what the underlying investments are worth and the turmoil in the markets, coupled with staff being out of the office, suggests that any current valuation risks being unreliable. Therefore, introducing measures to delay all pension transfers for up to 6 months would seem a sensible way of helping to stabilise pension schemes and allow time for a clearer picture to emerge.
Stopping transfers for a time would also help avoid further scam losses: Currently, the consumer is not adequately protected against pension scams. With so many people at home or out of work, there is a greater risk of cold-callers reaching more targets and, following the latest market mayhem, a rising concern about ‘too-good-to-be-true’ fraudulent investment offers finding willing customers who will transfer their secure pension and lose their life savings. PensionWise guidance cannot offer face to face sessions at the moment, so telephone and remote services will be delivered, but if people fall prey to scams they may not bother to take any guidance or advice. The Pension Schemes Bill has been going through Parliament but is now delayed and any extra protections to try to stop pension firms transferring money into scam schemes are not going to be in place for some time yet. So, in the interest of customers, putting transfers on hold could protect more people from becoming the latest victims.
Use the time to go back over past records and undertake data cleansing and reconciliation exercises: While transfers are put on hold, it is also important to use the next six months to step up efforts to reconcile past records, cleanse the underlying data and ensure customer pension information is validated. At the moment, the vast majority of pension schemes have error-ridden data which they have not invested sufficient time to cleanse. Pension administration has seen little investment and has been sadly neglected in the past. With the enormous complexity of pensions (and much of payroll still being carried out manually for vast numbers of small businesses) even the latest auto-enrolment pension records are full of inaccuracies. Using the coming months to focus on data cleansing would have significant advantages.
Accurate data will be essential for a Pensions Dashboard: As the Money and Pensions Service struggles to find a way to deliver a meaningful pensions dashboard (the project has been delayed time and again in recent years), a sustained focus on sorting out the underlying data and then working on standardised systems and records that are common across the industry, would accelerate the delivery of a reliable Pensions Dashboard. Consumers have put their faith in the pensions industry for many years and, as many will be approaching retirement and needing to see how much pension savings they have accumulated, the need for data accuracy is growing all the time.
Significant long-run benefits in addressing data errors: Using the dislocation associated with the coronavirus to focus on the underlying vital issues relevant to pension schemes would be a huge benefit to pension customers in the long-run. Rather than trying to keep schemes operating as normal in the short-term, it would be far more valuable to take the opportunity to correct the past mistakes that will otherwise continue to plague pensioners in future. If pension records are wrong, pensioners will be at risk of reduced pensions in future. Increasing attention given to pension administration now will save more pain later. The longer the situation remains unaddressed, the more it will cost to put things right. Leaving the investment markets to settle down, while we are in the middle of this crisis, is likely to be a better strategy.