Catering for customers’ customers

20th Jun 2016

Thinking about what the customers of your customers’ customers might require is difficult, but in the current pensions environment it’s the challenge that faces the Association of Professional Pension Trustees (APPT).

Ian Pittaway is Chairman of the APPT and senior partner of law firm Sackers, which specialises in pensions issues. After being in existence for barely four years, the APPT now has 135 members who are all experienced pensions professionals that serve as trustees on some of the UK’s largest pension schemes.

The APPT’s function is to protect the interests of the employees and pensioners – the APPT’s customers twice removed.

“It’s all about managing the relationship,” says Pittaway. “Making sure that there’s absolute integrity there, no surprises and good dialogue.”

For defined contribution schemes, which are increasingly replacing defined benefit or ‘final salary’ pension schemes, Pittaway says: “It’s all about member choice. In defined contributions, trustees are facilitators. They’re putting together a structure, but ultimately it’s up to the member to choose for themselves.”

The new pension liberalisation rules enable people to take their pension pot when they retire and more or less do what they want with it. They no longer have to buy an annuity and then manage their retirement on the income that it generates. They can invest it however they wish.

“Trustees would like members to take an informed decision as to what’s the right thing for them to do,” says Pittaway. “What trustees are nervous about is people taking the wrong decision, blowing their money and then a year or two down the line, when they realise they haven’t got any more to see them through the rest of their retirement, blaming the trustees.”

Pittaway is concerned that a judge or Ombudsman might rule that risks were not explained properly and that resulted in a poor decision being made, leaving trustees liable for reimbursing employees. 

There’s also the threat of fraudsters tempting employees with bad investments. Trustees can often spot these a mile away, so a legal safeguard gives pension schemes discretion as to whether to allow members to make such a transfer. While some employees don’t appreciate such restrictions, there are robust reasons for them. Many cases before the Pensions Ombudsman are about transfers that have resulted in members being wiped out. “You can understand why trustees are nervous about this,” says Pittaway. “Damned if you do, damned if you don’t.”

Such legal shenanigans mean that the pension scheme employee is much more the focus of the APPT than when it started out four years ago.

“Pension schemes haven’t always been customer-focused in the past,” Pittaway explains. “Hopefully that shift of attention is well underway and will produce better outcomes – higher, more secure pensions for our members. That’s what it’s all about.”

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