How can I help you? – Handling member queries the right way

Many trustees will, from time to time, find themselves contacted directly by members with questions and requests for information about their pension benefits.

Trustees generally want to help out members wherever they can. However, despite the very best of intentions and a wealth of scheme-specific and general pensions knowledge and experience, trustees can find that their efforts to help members don’t always end up quite the way they intended.

Most trustees are now well aware of the risks of giving individuals financial advice which would require them to have authorisation from the Financial Conduct Authority and are careful to avoid straying into this territory. For further information, see Emily Whitelock’s blog dated April 2021, New FCA/TPR “regulated advice” guidance: shades of grey.

However, when engaging with members there are other potential risks to consider too…

So what else could go wrong?

Pension schemes are subject to a highly complex web of rules and requirements. In contrast, the process for members to make a formal complaint if they are not happy with something is relatively simple.

This backdrop means that communicating with members directly could give rise to a wide range of risks for trustees. For example –

• Data protection issues – When trustees liaise with a member directly they may end up collecting personal data from the member. However, if personal data is not collected through a standard process it may not get properly protected or recorded. For example, a member could give a trustee their new address but if it is not updated properly on the scheme’s administration system their next benefit statement could be sent to their old address resulting in a data breach.
• Disclosure breaches – Trustees are required by law to give members certain information at certain times and in certain ways. Scheme processes are designed to ensure that these requirements are met. However, if a query is handled in a different way, relevant requirements and/or deadlines could be inadvertently missed.
• Misstatement/misinformation claims – If a trustee gives a member information, for example, about their retirement options, the member may act in reliance on that information. However, even if the trustee is familiar with their scheme’s standard options the information might not be 100% accurate because the trustee was not aware of a specific condition which needed to be met or of a non-standard option which only applies to certain members. If the member relies on the information from the trustee, they might not get the best outcome and they might complain.
• Higher defence costs, compensation payments and distress and inconvenience payments – If a member brings a complaint to the Pensions Ombudsman (PO), the PO is likely to look at the way the matter was handled from start to finish. If the PO considers that there were any unreasonable delays, false starts, or that the member has been provided with confusing or conflicting information (however inadvertently), trustees could find themselves coming under additional criticism. In some cases it could directly increase the amount of compensation the scheme has to pay. In others, it may increase the costs of responding to the complaint or the PO may award the member a higher payment for distress and inconvenience.
• Late insurer notification requirements – Where there is a possibility that a trustee might want to make a claim on their insurance in relation to a particular complaint it will be important that they follow the right process in terms of notifying the insurer of a potential claim. If there is a delay in contacting the insurer, this could ultimately impact the trustee’s ability to make a claim.

So what should we do?

Use the proper channels

Schemes are required to have an internal dispute procedure for managing complaints. The scheme’s administrators will also have well-established processes for handling member queries.

In most cases, the best way to get the right outcome for the member in the shortest timeframe and minimise the risks to the trustee will therefore be for the trustee to simply promptly direct the member through to the proper channel.

However, as different types of queries are likely to need to be handled in different ways, the “proper channel” won’t necessarily be the same in each case.  It’s therefore important that trustees are clear what the proper channel for each type of query is so they can direct the member appropriately.

Consider adopting a protocol for handling queries and complaints

 Given the potential risks for the trustee, and the potential benefit to the members, trustees may find it helpful to adopt a protocol which –

• highlights the risks the trustees should be aware of when engaging with members directly;
• sets out the key types of query they are likely to receive;
• gives some guidance to help trustees quickly classify (or “triage”) queries with only a few initial enquiries; and
• sets out how the trustee should respond/direct the member, depending on the type of query (i.e. what the “proper channel” is for each type of query).

Having a clearly defined protocol should give trustees more confidence that they are taking the right approach to get the best outcome for the member, as well as reducing the risk to themselves.

It should also help to ensure that all queries and complaints are treated consistently, regardless of who members contact in the first place.

In time it may even ultimately reduce the number of queries which come through the trustee, helping to free up trustee time to focus on other, more strategic, matters.

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