With more and more defined benefit (DB) schemes becoming ‘legacy’ arrangements, de-risking within the DB pensions market continues to be an attractive prospect for employers seeking to manage their long-term financial liabilities while also protecting member benefits. From the scheme/employer point of view, de-risking exercises such as buy-ins, buyouts and pension increase exchanges (PIEs) can offer greater security and predictability in a volatile environment. For the members at the other end of the exercise though, every step towards de-risking can feel like the start of a slippery slope.

Experienced administrators who are also effective communicators can help mitigate these worries and a big part of the success of any member-related de-risking exercise should be measured through how well the scheme and team support members. Sponsors want to see significant savings from de-risking initiatives and the best way this can be maximised is by meaningful member engagement.

Primary member concerns

The most common concerns from members will be how de-risking impacts the pounds in their pockets. At a basic level, many members may not necessarily understand the options being presented to them, and may commit to choices or financial decisions they later regret. Your administration team talks to your membership every day so, when it comes to member communications, it is essential that trustees listen to the administrator and work with them to design the communication strategy.

Know your systems, know your processes

A de-risking exercise will inevitably create a bulk of incoming work which will have a knock on effect to service-level agreement (SLA) performance. Both members and trustees will be keen to see work processed as quickly as possible. Employers should ensure administration teams are adequately resourced and primed to provide comprehensive guidance and reassurance from the beginning. If necessary adequate training, call scripts or FAQ documents, should be made available to administrators well in advance of the project start date. In a complex and jargon-heavy industry, knowledgeable and confident administration teams are vital for boosting member confidence.

If necessary, teams may need to show flexibility and, potentially, prioritise certain groups of people who require extra care or attention for various reasons. De-risking should involve high quality administration that offers an informed service, with providers choosing staff who will offer real support to adapt to the needs of the membership.

Customer care

By extension, informed members go on to make informed decisions. Any change to someone’s pension benefits can alter their retirement plans, which can naturally present challenges. One of the common drawbacks in one-off exercises like these is an over-reliance on temporary or inexperienced staff who have no ongoing relationship with the members. This is where call centre cultures can fail. Ultimately, when it comes to service and engagement, we all expect to be treated well; but as de-risking can be an emotive subject for some, employers and trustees should consider providers who choose high standards and member service as their core values.

Ross Oakey
Senior Pension Administrator – Barnett Waddingham

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