The collapse of BHS has created further uncertainty in the pensions industry, as trustees of pension schemes come under even greater scrutiny from industry bodies and members calling for greater governance and better communication.
We have seen how the recent Brexit vote has given defined benefit (DB) pension schemes another beating, after the stock markets went into meltdown. UK pension deficits have hit a record £935bn, with five in six DB schemes in deficit, as gilt yields hit record lows. Of course this is nothing new but we have been living with this trend for some years.
Over the past year, we have already seen a growing trend away from DB schemes due to falling stock markets, declining interest rates and rising life expectancy, all have increased the burdens on employers trying to run DB schemes.
As a result, we have seen a number of influential opinion formers and Select Committee enquiries into DB pension deficits. The most recent from the Work and Pensions Select Committee was launched with the warning that the issue of deficits put the ‘whole savings edifice in danger’.
The former pensions minister Steve Webb is very vocal about the issue, saying there are ‘many hundreds of zombie schemes’, where there is no realistic chance that DB pension deficits will be met. Frank Field MP, chairman of the Work and Pensions Select Committee, has said there is a wider issue here beyond BHS that is putting the whole industry in ‘danger’.
At a time of heightened uncertainty, pension trustees need to take action. As part of good governance, communication is key, especially in the way trustees communicate to their scheme members. A trustee of a scheme, has a fiduciary duty to act in the best interests of scheme members and provide effective reassurances where necessary so that members’ interests are being represented. The BHS collapse is an example of where members’ interests have not been met, and as a result has led to thousands of scheme members receiving a significant haircut on their pension payments.
Over the past year, we have been advising the pension schemes of a number of FTSE companies on external and member communications strategy and engagement programme. We have run integrated media and public affairs programmes for the schemes to ensure members’ interests are central to the debate. We expect this to be a growing trend as DB schemes are in the spotlight.
Below is a checklist of some of the issues that trustees of DB schemes should think about carefully when communicating to their scheme members.
Trustees and their advisers should be considering their communications to both members and the media now, rather than reacting when there’s a crisis.
Checklist for trustees of DB pension schemes to think about
- Make sure you have an up to date communications strategy
- Develop clear and concise messaging
- Prepare for any unforseen scenarios – i.e. how robust is your cybersecurity response?
- Regularly communicate with members in an engaging and topical way i.e. letters, videos and newsletters
- In the event of an announcement, have the necessary material ready (Q&As, proactive / reactive statements)
- Have a press / communications office for managing all communications or ready to be instructed
- Have media and social media monitoring in place or ready to be deployed
If you would like any further information on how we can provide any communications advice for your pension scheme, please contact firstname.lastname@example.org