The newness of pension freedoms is wearing off, but some employers are still reluctant to discuss the options with employees, writes Lynn Graves
Since April, we’ve seen a small but significant number of employers telling us that they are actively avoiding sharing any kind of information about pensions generally and pension freedoms in particular, with their workforce. They cite concern that by signposting information they might be seen as giving advice, or in some way be held accountable for the decisions individual employees make about their pension pot.
Some employers fear that even if they highlight resources, or provide access to an adviser, they might become liable for recommending or endorsing a service which may ultimately not deliver as the employees expects.
But with the recent volume of change to pensions – and the decisions that individuals now need to make regarding what to do with their pension pot – it’s more important than ever for employees to understand the changes and what they mean to them.
So what are the implications for employers?
It’s true that employers should not give employees financial advice. Only advisers registered with the Financial Conduct Authority are allowed to do so, but there is nothing stopping employers from providing information and guidance, or signposting where to get it. Many advisers and pension providers offer access to teams delivering face-to-face presentation sessions to talk workforces through all aspects of their pension, including informing them about their pension freedom options.
Similarly, as long as employers are not trying to pressure employees to opt out of a scheme, influence investment choices outside of a default fund, or the choices made at retirement, employers are free to share general information, or direct employees to where they can get it. Again, both advisers and providers have access to a range of tools and information that employers can rely on to support them with this.
The Pensions Regulator (TPR) recommends that if asked for further information about the options available, employers and trustees should direct employees towards Pension Wise and/or an FCA regulated financial adviser. To avoid the risk of giving advice, TPR recommends that trustees do not provide specific risk warnings based on a member’s individual circumstances.
As many employers now offer a workplace scheme as part of auto enrolment (AE), there is a legal obligation to provide some information about the scheme an employee is in. This includes basic information about how AE applies to them, their opt-out rights and what contributions will be deducted from their pay.
What can employers do for their employees?
- Signpost information and guidance from Pension Wise
- Encourage employees to speak to their Pension Provider
- Signpost sites like Unbiased.co.uk for access to IFAs
- Complete mandatory communications for AE
The most risk-free approach is to encourage employees to speak to their pension provider, and use free resources such as the government-provided Pension Wise, or online resources like the Scottish Widow Retirement Planning website.