Signposting to pensions guidance: our findings

Since April 2015, consumers have had greater choice around how they access their Defined Contribution (DC) pension savings. It is important that consumers looking to access these savings understand the consequences of the decisions they make.

Background to the review

The Conduct of Business (COBS) rules, implemented in April 2015, are designed to give consumers added protections against the risk of poor outcomes in the new pensions landscape. In addition, the rules set out the minimum framework for how we expect firms to engage with their customers to inform them about the availability of pensions guidance (Pension Wise) provided by designated guidance providers, and how they may access this service. Pensions guidance provides one means of helping consumers to understand the risks they face and help them protect themselves; another is regulated advice.

Our review looked at how firms are complying with the relevant COBS rules - in particular, whether firms are appropriately signposting the availability of pensions guidance when communicating with customers looking to access their pension savings through non-advised sales channels.

In addition, while pension freedoms provide increased opportunities to choose how to access pension savings, they also present greater risks of irreversible losses from pension fraud and scams. We have therefore sought to understand how firms are highlighting this risk to their customers.

Our review focused on desk-based analysis of information provided to us by 20 firms - 10 life insurers and 10 self-invested personal pension (SIPP) operators.

Our findings are detailed below and include examples of good practice and examples where improvements could be made. In labelling something as ‘good practice’, we are not confirming that it meets all the requirements under our rules and our labelling something as ‘an example where improvements could be made’ does not necessarily mean it is a breach of our rules.

Our findings

Firms’ obligations to signpost pensions guidance under our COBS rules and Principle 7 (Communications)

The majority of firms in our sample were, on the whole, meeting our requirements around signposting to pensions guidance.

Good practice identified from the review:

  • Firms in our sample that had proactively considered and tested the needs of their customers to improve their communications tended to have clearer and more prominent statements around signposting in comparison to their peers. For example, a number of firms had undertaken customer research and/or user testing around their communications. One firm had provided its staff involved in developing retirement-related communications with some training on behavioural economics. The effect of this type of activity was evident in the quality of the communications we reviewed.
  • A number of firms signposted pensions guidance early on in the wake-up pack, providing full contact details upfront.
  • We saw examples where firms used techniques such as bold font sizes and colour (including use of the Pension Wise logo) to help improve customer engagement.
  • A minority of firms used other communications to remind their customers of the availability of pensions guidance, for example, including appropriate references to pensions guidance in annual statements.

Examples where improvements could be made:

  • Some firms did not always highlight to their customers the different ways in which Pension Wise could be accessed. For example, some forms of communication (eg wake-up packs and call scripts used by customer contact staff) only included the website contact details, as opposed to also including the telephone number for the service.
  • We identified a number of instances where firms used inconsistent terminology in their communications when making reference to pensions guidance, for example, references to ‘guidance guarantee’ as opposed to ‘Pension Wise’.
  • A minority of firms presented their own (or partner) offering in a more prominent manner in written communications in comparison to the signpost to Pension Wise.
  • We found some instances where firms’ written communications provided only a partial signpost upfront, requiring the customer to then look elsewhere in the documentation received to obtain complete details. For example, inappropriate use of cross-referencing, and/or the signpost being spread throughout the pack, as opposed to being in one place.

Raising awareness of pension scams/fraudulent activity

We were encouraged to see some firms in our sample taking a particularly proactive approach to identifying potential scams and raising awareness of these amongst their customers.

Now that consumers have more choice as to how they access their DC pension savings, they are potentially more exposed to pension scams. We have recently re-launched our ScamSmart campaign as part of our regulatory toolkit to educate those consumers at risk. We are encouraging firms to increase their own efforts to help raise awareness amongst their customers.

Good practice identified from the review:

  • Some firms used both internal and external sources of intelligence to help monitor and identify potential scams and fraudulent activity. For example, engaging with others in the industry through working groups and forums.
  • Some firms raised awareness of scams throughout the customer’s retirement journey rather than, for example, just at the point where the customer requested to transfer their pension pot to another provider.
  • Some firms had structured internal processes to help ensure staff were kept up-to-date with new types of scams and fraud. This appeared to work particularly well in circumstances where it was tailored to the firm’s specific product offering and customer profile.

Staff training

Most firms in our sample provided frontline staff with some form of training around signposting to pensions guidance.

Good practice identified from the review:

  • Some firms in our sample adopted a more comprehensive and interactive approach to training, for example, using a combination of role plays, presentations and behavioural economics. Whereas other firms just relied on call scripts or process documents as their key source of training material.
  • Firms that had in place a process for testing the quality and effectiveness of the training to identify any gaps, for example, through call sampling and customer surveys, generally produced clearer more effective customer communications around signposting.

Oversight activity, including the collation and use of management information

Oversight activity, including the use of management information (MI) around signposting to pensions guidance by the majority of firms in the sample was, on the whole, inadequate.

Examples where improvements could be made are:

  • The majority of firms in our sample undertook some form of oversight activity such as case sampling and/or call sampling. However, we identified a number of instances where firms were not using the results of such activity to help monitor trends and make improvements in relation to signposting pensions guidance in their communications.
  • A number of firms had not performed any compliance (second line) oversight activity across all their channels of communications to provide assurance that they were signposting effectively. There were also instances where firms did not have clear procedures in place for escalating issues and/or risks identified in this area to senior management.
  • Several firms did not enclose the latest version of the Money Advice Service factsheet and some firms were not including the latest version of the Pension Wise ‘government’ letter.
  • A significant number of firms in our sample did not appear to be collecting (or using) any MI in relation to signposting pensions guidance beyond that provided to us and used in our Retirement Income Market data publication. Without such MI we question firms’ ability to provide effective oversight in this area, which is particularly important given the significant changes in the pensions landscape.