Newsletter – August 2015


Pensions News Bulletin August 2015

1. Pension Freedoms – No to advice but we still need help

The financial comparison web site has just published a fascinating survey showing that half of those making pension freedom withdrawals will not pay for advice. Many others underestimate the cost of getting advice, find financial advisers intimidating or expect the advice to be a waste of money.

As readers of this newsletter will know, from last April over 55s have been able to take the value from their defined contribution pension accounts in a number of ways. This choice is the ‘pension freedoms.’

The flexibility of the rules makes understanding the full range of options difficult. The options are varied and can be mixed together in a number of ways. On top of that, valuing the relative merits of the options for any individual is an art rather than a science. Which option is ‘best’ will only truly be known with hindsight as the choices are not directly comparable as far as a person’s individual outcome is concerned. If that wasn’t difficult enough some of the choices will be sensitive to future investment returns, inflation and interest rates and these are not predictable over the long term, which from age 55 to ‘passing on’, will be a very long time for most people.

For example if you lived for say 35 years having taken an annuity, which general commentary tells us is poor value, that may well have given you a better financial total reward than cashing out early on. But if you took all as cash and paid tax but yet paid off your debts including mortgage and bought a needed new car, you may have had a better result for your own life situation. Who’s to tell?

The several million of the population newly auto enrolled will not have accumulated enough value in their pension pots for very many years to choose anything other than cashing out. It’s those with more substantial pension assets that need to more carefully consider what they do. For this, the government’s free Pension Wise service should be at least one port of call if they take no other interest.

The internet is full of free and useful help about what people should consider and the ins and outs of the various options. But individuals need to take responsibility and bother enough to look and then to read. However employers can help in this area too and with low cost and no regulatory risk, they can provide help that would be appreciated by their employees and provide a great degree of satisfaction for themselves. This can be delivered in a number of ways via their own on-line communications or via the HR or finance departments with very little training and time consumption.

You can find the survey results here.

2. Cyber security – Securing your pension scheme communications

In July’s newsletter I wrote an article, ‘Cyber Security – How secure are you, your business and your pension scheme?’ and amongst the responses I received was an interest in improving the security and effectiveness of correspondence between pension schemes and their beneficiaries. The following insight would apply equally to communications between employers and their employees or businesses and their customers.

Most companies and pension schemes use the postal service and email for all their correspondence. In the case of post this tends to be expensive, not entirely reliable and you can’t be certain when the content was actually read and if it was read by the intended recipient. In respect of reliability, the issues are delay in receipt, lost post and imperfect automation causing, for example, attachments, like the benefit statements, being enveloped with the wrong letter. For example Mr Smith (facilities administrator) receives Mrs Smithson’s, (chief executive) benefit statement.

There is another point – engagement – sending an email or letter and expecting the recipient to log on to a portal which then needs their ID and password has a poor success rate.

These days security technology has an answer for these problems. It is the true digital mailbox. Not to be confused with email applications, the digital mailbox provides security of the correspondence throughout its journey and there are further spinoffs such as….

  1. lower cost,
  2. certainty of receipt and readership by the correct person and
  3. the availability of delivery anywhere in the world the addressee happens to be.

It works like this.

You create the letter using your existing system but instead of sending it to print or email, it would be sent as a PDF file to a secure app on the addressee’s mobile device or computer. Not through email.

From here, the addressee (customer/employee/scheme member etc.) would be able to print it or save it on their devices. The organisation that sent the message would be notified when the letter had been received and read. The system would be a “closed” communications system meaning organisations would be able to send messages only to users who have agreed to be contacted, thereby eliminating spam and ‘phishing’ scams.

The system overcomes portal fatigue where users are increasingly tired of having to manage login details for so many websites. Because the digital mailbox is a closed and secure conduit between you and your addressee, the relevant communication could carry a hyperlink to your company or service provider’s portal which took the addressee past their login requirements of ID, PIN and password and landed them directly to where your company wanted to take them. For example to their secure personal account.

This is bringing communication into a delivery-certain, secure and scam free world.

Please contact me if you would like to learn more about adopting such a system for your own company or pension scheme.

3. Auto enrolment sanctions enforced as at 30 June 2015

The pension’s regulator has published its quarterly bulletin for the period ended 30 June 2015

The report provides information about their supervision and the powers they have used on employers relating to automatic enrolment and the employer duties. The data is provided in the table below. The total column represents all cases since auto enrolment began. The amount for the quarter can be downloaded from the regulator’s website here.

Power Description Total to 30 June 2015
Information Notice Power to demand information and documents under section 72 of the Pensions Act 2004 36
Inspection Power to inspect premises under section 74 of the Pensions Act 2004 13
Compliance Notice Compliance Notice under section 35 of the Pensions Act 2008 to remedy a contravention of one or more automatic enrolment employer duty provisions 1295
Unpaid Contributions Notice Unpaid Contributions Notice under section 37 of the Pensions Act 2008 to remedy a late or non-payment due to a qualifying pension scheme 71
Fixed Penalty Notice Fixed Penalty Notice under section 40 of the Pensions Act 2008 of £400 for failure to comply with a statutory notice or some specific employer duties 332
Escalating Penalty Notice Escalating penalty under section 41 of the Pensions Act 2008 of between £50 and £10,000 per day for failure to comply with a statutory notice 4
Total 1751

Expect to see the numbers rise dramatically from here as auto enrolment spreads to the enormous number of small and micro employers who are less prepared than they should be.

Thank you for reading.