It’s been a slightly shortened first full working week in April 2015 due to the Easter Bank Holiday, but at the same time it’s been a momentous one – the pension reforms that have been talked about so much over the last year have finally arrived.
In many ways, this week must have been approached with some trepidation by firms and advisers alike. There has been so much preparation to do, both to understand the new rules and to implement the regulatory changes, but there was one unknown in all of this – how pension policyholders would react once the freedoms become available.
This must have been a concern, as providers and advisers have been making plans to deal with an increased volume of enquiries and requests for payment of lump sums.
The early signs for the industry appear to be that volumes of activity have increased but are manageable. But the end of the first week is probably a good time to take a look at your specific experiences and determine if there is anything you need to do differently, before the changes gather momentum.
To that end, here are some questions to ask yourselves.
Do policyholders understand what they’re being told about the changes?
This is partly driven by the pre-retirement materials that people are required to receive from their providers, but also partly by what people have read in the media.
Early reports are that there appear to be some areas of confusion. Some believed that 6 April was a deadline by which benefits had to be taken. Others were not aware that pension lump sums could only be accessed after age 55. There was also some confusion over whether it is currently possible to exchange existing annuities for cash.
Regardless of whether these questions have been driven by adviser or provider materials, it is the people at the sharp end who are taking policyholder calls, so how comfortable are they about providing the messages that people need to hear? Also, are they doing this without providing advice or guidance (if they’re not able to do so)?
Has policyholder activity been in line with expectations?
According to what has been reported in the media, there appears to have been the expected high level of demand for payment out of smaller lump sums (despite the potential tax consequences), whilst those with larger pension funds have been largely taking their tax-free cash.
At the same time the call volumes into firms have been greater, as expected. They appear to have picked up as we moved towards the end of the week.
Both of these trends will have meant that the FCA’s requirements for firms to act as a “second line of defence” will have been put to the test. Where a policyholder has indicated for definite that they want to take their pension benefits, they must have a series of questions posed to them, and be provided with a series of pre-determined risk warnings.
The question for providers is – how has the experience of providing these risk warnings been in practice? Providers are not required to carry out any further checks once the risk warnings have been imparted, but the natural question is whether, having received these warnings, whether customers acknowledge them and understand what they’re being told?
Have payment volumes been manageable?
So far, the expected deluge of payments does not appear to have materialised, but after the first week, activity has been substantial enough for providers’ preparations to have been warranted.
The issue for providers is whether they have enough people and systems capability to be able to turn these payments around in a reasonable timeframe. Delays could cause customer dissatisfaction and complaints – especially if customers have already created a dependency on receiving these funds.
How are your training needs looking?
The issue of training for staff is not something that providers and advisers will have only just started thinking about – it will be something no doubt that has been dealt with over the last few months. But the question now will be – has the training that’s been given so far been demonstrated in the level of staff competency that is required to deal with customer queries in practice?
There are two principal ways that this is put to the test. The first is by the information that is provided to customers when they call up with queries. It’s one thing putting in place scripts to deal with expected scenarios, it’s another to deal with real-life queries which somehow don’t often go the way the script intends them to. This is especially true if customers ring up explaining their frustrations with the process they need to go through – especially if the root cause of that is things that providers are obliged to do by regulation. The skill here lies in having enough of an understanding of the rules and the things people can and can’t do, whilst at the same time only being able to provide guidance within the remit that they have been given by the provider.
The second is in the processing of the payments. Where volumes are substantial, firms will have to consider batching these in one way or another and paying them in bulk. But the people handling such payments and the administration of the forms will need to make sure that they have all the requirements that regulations say they must have, in order to avoid customer dissatisfaction. Two key points here are around the need to record whether the customer has received advice or guidance, and the need to receive an adviser’s certificate where policies are worth more than £30,000 and have a guaranteed annuity rate attached.
So, now is a good time to review whether those training arrangements have stood up to scrutiny during the first of what will no doubt be many interesting weeks. And if you need help, Industry Events Online is the best place to turn to in the first instance.
By Martyn Oughton a Professional Member of the International Compliance Association (ICA). Martyn now writes a regular blog for Industry Events Online focusing on the importance of training in all aspects of compliance. Read Martyn's other publications at Martyn's Writers' Residence website.
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