Whilst freedom and choice brings much more flexibility for pension scheme members, the downside is that without sufficient knowledge, it can be easy for them to make poor decisions which can create a permanent dent in their retirement income. This could include paying more tax than necessary, underestimating how long their retirement savings will need to last, falling victim to a scammer or making ill-judged investment choices.
Trustees are currently under no legal obligation to provide access to regulated financial advice to its members. Some schemes offer basic information on how their members can find an adviser but do not provide any support in assessing the suitability of any given adviser. The downside of this became very clear in the British Steel fiasco when members were left to their own devices to find an adviser with many being ill-advised at best or scammed at worst.
For a long time there has been a concern by many Trustees that helping members gain access to advice carries risk for the Trustee. However, a discussion paper from Eversheds Sutherland and Royal London suggests that this theory only looks at ‘the risk of doing something and not at the risk of doing nothing’. It highlights that simply referring members to a list of advisers for them to choose from can lead to significantly poor member outcomes and therefore member distrust. In some cases, this can lead to reputational damage, as seen with British Steel.
If done correctly, facilitating access to regulated financial advice does not carry the risk many presume.