When was the last time you heard the words pension and romance in the same sentence? Probably never, yet the secret of a good pension scheme is very much akin to that of a good relationship. You must work at it, tend to its needs and make changes for the better, writes Paul King.
It can be all too easy for a company pension scheme to fly under the radar. It’s established, doing what it should and needs hardly any TLC, right? Wrong, a pension product should undergo regular checks, from straightforward administrative reviews to good governance.
It’s all too easy to let something as simple as a marital status update or new home address slide if pension details are not regularly assessed and updated. Small oversights can lead to bigger errors. Other trigger signs can include a lack of communication or regular meetings and updates on a group scheme.
This is where independent advice can help. For the enterprise without a scheme in place, seeking the appropriate expertise to shed light on scheme options, how they work, are set up and managed, can take the pressure off what is commonly perceived to be a “difficult issue” in the workplace. Those who have some form of employee pension in place can also benefit from external advice that can improve on existing schemes and deliver better retirement outcomes for the employer and the workforce.
If there are no calls to action, poor administration and neglected investment performance can set in. Letting a scheme slip from view or never get off the ground in the first place can lure a company into carelessness. It may take a major upset in the form of an administrative error or prolonged under performance from an investment point of view or rattle in the economy for a scheme to be laid bare and exposed for its weaknesses. That is when companies are likely to seek out independent advice.
Rather than closing the stable door after the horse has bolted, independent advice can be an enlightening process for the company with an existing scheme in place. Even if the business has their own pensions manager, an independent advisory body can offer an opinion and a status check on the scheme and its performance. An adviser will check the pensions investment strategy, rate the performance of the fund manager, examine trustee input and governance of the board, monitor fund performance, deliver honest communication and ensure that the administration platform is as good as it can be.
Meetings and training for trustees place an importance on the issue and ensure those responsible for the management of the fund are well informed and at one with best practice.
Having someone tell you that all is well or working with you to create an improvement agenda can be a useful thing. If a company pension scheme has remained in place and unchanged for 10 or 20 years, then it may be badly in need of an update. The level of charges should be commensurate with cash flows while cost structures, which might not have changed since inception, should be reviewed.
Independent advice will highlight the need for schemes to be reviewed systematically and the level of charging should be commensurate with the cash flows. Investments should also be reviewed to ensure that there is good governance. Companies have to protect themselves and their employees to ensure that the pension scheme members are dealt with in a way that improves their chance of having a good standard of living in their retirement years.
Independent advice isn’t always about usurping the incumbent provider rather it is an opportunity for a fresh set of eyes to inspect and gauge the best option for your scheme. Liken it to a health check or a ‘Yes’ check, where an independent voice can offer an impartial opinion because there is always room to improve.
Paul King is Acuvest’s Business Development and Client Manager. Contact Paul at email@example.com or follow him on Twitter @kingofpensions
Acuvest is an independent pensions and advisory management business taking care of the futures of over 40,000 of our clients’ employees. For more market analysis and expertise follow Acuvest’s daily updates on Twitter @AcuvestIreland and LinkedIn and our fortnightly blogs.