With just over seven weeks before the new pension reforms start to take effect, it’s time to take a reality check. This will cease to be a project that firms need to deliver and will become real life.
Over the years (and decades even), the industry has had to come to terms with a number of substantial changes, many of which happen on one day, with very little, if any phasing in. You can trace this back to the Financial Services Act 1986, and the introduction of its requirements in 1988 for firms to be regulated. After this, there have been a plethora of changes, each usually coming with their own “A” day.
Think about it. Here are just a few examples. The introduction of hard commission disclosure and key features documents, stakeholder pensions, simplified pension tax rules, MiFID, the new FSA Conduct of Business rules, EMIR, Solvency II, and now the latest round of pension rules.
In each of these cases, when there has been a period of development running up to an implementation date, there has been a combination of draft rules and regulations, together with speculation about the effects these will have on the industry.
And the latest pension reforms have been no exception.
At the moment, the speculation is gathering pace substantially, and there’s a lot to talk about. But in the meantime, firms have to get on with the job of making sure they work with what they know and are able to discern the facts from the rumours.
Set out below are some examples of what I mean.
What we don’t know – how many people will actually take their pension fund as cash
There are numerous theories going around about whether there will be a big rush on pension funds come 6 April 2015, and what people will do with that money. Everything from buying Lamborghinis to investing in buy-to-let property. But all the surveys and expert opinions will be no substitute for the practical experience of what will happen come April.
What we do know – there will be a greater interest in accessing pension funds and people will be making decisions
By now most, if not all pension firms, will have come to the conclusion, either from listening to customer feedback or through surveys, that there will be a significant number of people who will be interested in taking their pension fund as cash. In fact, firms really need to understand this, in order to make sure they have the right amount of resources in place come April to deal with the volumes of transactions anticipated.
What we don’t know – how many people will use Pension Wise, and how much it will help shape their decisions
This one is difficult to call as well. After all, the Pension Wise service has only just been established, and not all firms will yet be signposting the existence of this service in their pre-retirement literature (although they’ll need to do so very soon, as it’s a regulatory requirement).
Therefore, it’s hard to tell at this stage just how much interest and take-up in the service there will be. Some insurers have tried to pre-empt this by undertaking exercises to guage the opinions of samples of people, and the results have not been encouraging. At the same time, some industry commentators have been expressing concerns over whether the service’s website will be able to deal with the initial demand from consumers without crashing.
What we do know – Pension Wise will be available, but firms are expected to play their part too
Whether or not Pension Wise has teething troubles or issues with the delivery of the service to begin with, the fact is that the service is available, and firms are expected to tell their customers about it. But regardless of the take-up rate that’s experienced in practice, many customers will still look to their provider for support and guidance. Which is why the FCA, in its recent “Dear CEO” letter, stated that it requires firms to act as a “second line of defence” against consumers making poor decisions.
This is a crucial time for firms, and they need to play their part to help deliver the right outcomes for their customers, as well as to protect themselves in the event of complaints from customers in future.
What we don’t know – how the training available to Pension Wise staff will help to strengthen the service
The Pension Wise service will be delivered by two bodies; Citizens Advice and TPAS. The challenge is to ensure that the staff in both organisations are trained to the extent that the service is provided to a consistent standard to all consumers and across all channels. At present, there appear to be some differences in the levels of experience required for the roles in Citizens Advice and TPAS, although, to be fair, both state that membership of the Pensions Management Institute or the Chartered Insurance Institute (or attainment of their associateship qualifications) would be an advantage. The challenge will be the level of skills, knowledge and experience of the people who are actually recruited in practice, and bringing them up as high as possible.
What we do know – firms’ staff need to be well-trained to deal with the changes
All the speculation about Pension Wise cannot be allowed to take away from the fact that each firm needs to identify the right training needs for their staff, and ensure these are delivered in enough time for 6 April.
Different firms will have different needs, but here are some examples that could be considered. Firstly, refresher training in the rules for training and competence supervisors. Secondly, technical training or call/complaint handling training for those manning customer care lines. Thirdly, an appreciation of industry developments and perspectives to help risk and compliance functions adjust their risk profiles.
Whatever the training need, there’s still time to address it. Firms know what’s coming so they must deal with that.
Time is tight, though. But Industry Events Online is the perfect resource to identify training opportunities efficiently.
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.
To keep up to speed with new events and blog posts sign up to the Industry Events Online weekly newsletter.