1. The immediate threat of fraud
The policing of pensions is a precarious business and the “thin blue line” is figurative. The police are reluctant , for good reason, to busy themselves in the complexities of criminal maladministration , prosecutions for outright fraud are few and notoriously late. Scammers do not fear police but they do fear alert administrators which is why the work of Margaret Snowden and others active in the prevention of fraud – is so important. It’s especially important today
Coronavirus is likely to lead to a significant number of financially desperate people who will be easy prey to scammers using on line ads to encourage them to release funds from their pensions. This is worrying. Pensions professionals should do everything we can to prevent it.
— Margaret Snowdon OBE (@margaretsnowdon) March 19, 2020
What is important is that we adopt a zero tolerance policy on suspicious activity. I don’t mean we become vigilantes , but I do think we can tighten up our processes by following accepted codes of practice. Again Margaret Snowden leads on this.
PSIG expand on a growing concern within the pensions industry & wider financial services sector around the abuse of SARs…
— Pension Scams Industry Group (@combatscams) March 2, 2020
I’m pleased to see that other initiatives, such as Pension Bee’s funding of an anti-scam game that can be distributed to all vulnerable to scams (eg every active and deferred member of a funded DB plan – every saver into a DC plan).
But most of all, we need to make the stigma of being associated with pension scamming, at a time of coronavirus as odious as deliberately spreading the disease. I hope that those found to be exploiting people’s current vulnerabilities will find they have nowhere to go to hide their shame. Perhaps that’s one of the few advantages of a pandemic.
2. The longer term impact of maladministration
It is very possible that COVID19 will shut down large parts of our industrial capacity. To avoid this happening in areas where continuity of service is vital, the Government has established a new class of worker ‘the essential worker’.
It is important that pensions administration is considered “essential” to the proper running of our financial system. Thankfully, pension administration is increasingly automated, but much of it is still dependent on manual interventions and if a backlog of work is allowed to build up because there are no essential workers to move the workflow on, then we could see real and lasting damage to the business of DB record keeping and the proper allocation of money to DC accounts.
I am worried that much pension administration is outsourced abroad. There is currently no way to get to countries where our data is held and our records updated, the worry is that a catastrophic failure in another country might not be picked up. Disaster recovery plans are notorious for dealing with the known knowns, Covid19 may yet throw up some unknown risks.
I am not involved in pension administation, other than as a beneficiary of various plans and schemes. But I worry that the risks of poor administration fall into regulatory cracks. many of the 40,000 schemes that the Pensions Regulator has oversite for, are run on antiquated systems that can’t even make it to Pension dashboard basecamp.
Even though the administration for these smaller schemes is UK based, the worry is that if key people (essential workers) are absent from their admin duties in numbers , that irreparable damage could be done to scheme administration.
Making lives simpler for administrators
1.Transfers and valuations in general
An actuarial friend of mine sent me a DM on twitter earlier today
My personal – but of course obvious view is that this is a world changer. Generally people don’t get it, and that is understandable.
The next two weeks will demonstrate that this is dire. I am all for big moves now rather than later.
So can I ask you what you think of
(1) banning transfers for 6 months
(2) deferring all actuarial valuations for a year.
In practice we will not have the fit manpower to do either properly in the next year. Valuations are hugely uncertain and anyway what is a year under current circumstances?
And as last Friday easing up on DRCs makes valuations redundant – and as for loads of actuaries looking at subtle changes in mortality experience in the past 3 years – waste of money.
Idea on transfer is big prevention on scams. Allow the trustees to defer more readily.
This would make life a little easier for administrators (and a lot easier for actuaries – though they may want the work).
2. Lockdown on complaints
But the bigger problem for pension schemes is “administrative complaints”. If work stacks up, as it surely will, then the complaints will surely follow.
If – as my actuarial friend would have it, let’s have ‘big moves now”.
Let’s make it clear to members that complaints arising from lack of capacity (essentially delays) should not be escalated through internal dispute processes – lawyers -trustees and the pensions ombudsman.
This goes for private escalations to the press, CEOs and chairs of trustees. And there should also be a limitation of data access inquiries.
Pension administration – as important as payroll
Payroll – which is immediately accountable if it goes wrong, needs to be accorded essential worker status. So should pensions administration.
You can mothball a lot of things but you can’t mothball the regular updating of payroll and pension administration.
I wrote earlier today, that it takes a crisis for people to realise the real value of salaries and benefits. Ricky Sunak has done that with his latest interventions.
We are still unclear what children will be able to go to school tomorrow , here is the Government’s guidance with regards financial services employees who may be deemed essential. I hope that we will prioritise our administrators and make sure they are allowed to continue to do their job.
Utilities, communication and financial services
This includes staff needed for essential financial services provision (including but not limited to workers in banks, building societies and financial market infrastructure), … information technology and data infrastructure sector and primary industry supplies to continue during the COVID-19 response, as well as key staff working in the civil nuclear, chemicals, telecommunications (including but not limited to network operations, field engineering, call centre staff, IT and data infrastructure, 999 and 111 critical services), postal services and delivery, payments providers and waste disposal sectors.
If workers think they fall within the critical categories above, they should confirm with their employer that, based on their business continuity arrangements, their specific role is necessary for the continuation of this essential public service.
If your school is closed, then please contact your local authority, who will seek to redirect you to a local school in your area that your child, or children, can attend.