It’s not a good time to be an inexperienced pension trustee. Now more than ever, the steady hand of a knowledgeable trustee is needed to reassure employers – as well as safeguard members’ interests. The right advice is critical.

DC investments and market volatility

With so many people under financial pressure, the over 55s may think that accessing their DC pension savings early is the only solution to see them through the current crisis. However, falls in the market and individual fund values may cause members to make poor decisions that could have disastrous and irreversible consequences for their long-term retirement plans. Pension scams create an additional risk as people struggling financially could become more susceptible to scams promising better returns. 

It’s all about keeping calm and playing the long game – of course, this is easier said than done if you need cash now. A recent survey found that 11 percent of UK adults have considered tapping into their pensions to tide them over during this period. And undoubtedly, the longer the crisis continues, the more likely it is that people will look towards their pension pot for a solution to their financial worries.

More figures from HMRC appear to support this trend. Just under 350,000 people accessed their defined contribution pensions in the first few months of 2020, an increase of 23 percent from this time last year. In addition, £2.46 billion was collectively withdrawn from pensions in the first quarter of this year, a 19 percent increase from 2019.

Transferring benefits may be the wrong decision

For those with DB schemes, members might look to access their funds by transferring to a DC arrangement from which they can retire where that option is not possible in the DB scheme. The Pensions Regulator has recommended Trustees to write to members to advise them to think carefully about transferring their benefits. Moving out of a DB scheme into a DC arrangement ordinarily only works for a small minority. 

Communicating to members

Trustees must play their part in safeguarding members’ pension pots that have been built up over a lifetime. To achieve this, communication is key.

20-20 Trustees has been approached by employers who are struggling to grapple with what to communicate and when. We have provided clarity about what information they should and should not be providing to staff who desperately need guidance to help them navigate through this crisis. That’s why we are currently working in a consultancy capacity for numerous organisations who need professional help during this coronavirus outbreak.

20-20 Trustees has also helped Trustees understand the impact of COVID-19 on their schemes and how that impact could affect members’ benefits.

As outlined above, there are several key messages that need to be communicated and both employers and trustees have a critical role to play. Members’ must be provided with clear, relevant and timely information to help them make informed decisions that will secure their long-term future.