LCP and Royal London Paper – Helping DB members make better retirement decisions

Together with Royal London we have published a policy paper that examines the role of schemes, advisers, regulators and government in helping DB members make retirement decisions.

The paper explores the many options that DB members have to reshape their retirement income and asks whether more could be done to help them make the right choices as they approach retirement.  Bringing together the results of specially commissioned surveys of occupational pension schemes and of financial advisers it concludes by recommending that:

• Occupational pension schemes should provide more comprehensive information to scheme members about their options regarding their DB pension rights, especially in light of the ‘pension freedom’ reforms of April 2015 – this information needs to be supplied earlier, communicated clearly and supported by access to high quality advice and guidance
• All individuals should have the option to transfer part of their DB rights rather than face an all-or-nothing choice about whether or not to transfer rights which may be worth more than the value of their home
• Transfer value quotations should be accompanied by standardised information that will enable financial advisers to evaluate the pros and cons of a transfer in an efficient manner
• The FCA should proceed with plans to update the advice framework around DB to DC transfers to reflect the post pensions freedom environment
• More focus should be given to advice and guidance post retirement – in particular, where individuals have transferred large capital sums, policy makers need to ensure that they have the ongoing advice and guidance that they need to manage this money effectively

For details of our survey of occupational pension schemes click here and to read LCP partner Jonathan Camfield’s blog click here.

Comment

The pension freedoms have had a number of dramatic effects on behaviour, which as they are playing out, are exposing gaps in the regulatory framework and potential shortcomings in the manner in which schemes communicate with their members and the information they supply.

As such, we, along with other industry commentators, believe that reform in this area is overdue.  We hope that this paper sets out some interesting thoughts on what could be done, and that it will stimulate some action within Government and regulatory bodies.

LCP guide on climate-related risks published

We have produced a new educational publication on climate-related risks and the issues that arise from them for DB and DC pension schemes.  This is in the light of increasing focus on such risks across the financial sector.

Climate-related risks include both physical risks from the climate itself and – what are likely to be more important in the near term – transition risks from policy, legal and technological changes as we move to a lower carbon economy.

The LCP guide to climate-related risks for pension schemes looks at the risks and opportunities arising from climate change, examines their relevance to pension schemes and concludes with a summary of the Pensions Regulator’s current expectations, what the law currently requires of pension scheme trustees and how the law might change going forward. 

We also provide a useful summary of the actions that trustees should consider taking.

Comment

We hope that you find our LCP guide an informative read, whatever your personal view is on the extent and severity of climate change.  We expect this issue to take on increased importance in trustees’ agendas over the coming years, particularly in relation to investment.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.