Government proposal to remove barriers to Trustees communicating helpful information to members

How should Trustees advise on pensions and what are the barriers to communicating helpful information to its members? The main issue is that there is a lack of clarity by way of guidance and legislation between what constitutes information, support and guidance on the one hand, and regulated advice on the other.

For that reason, Trustees must (given the risk of criminal penalties and member claims for financial loss) err on the side of caution lest they inadvertently stray from helpful guidance into regulated financial advice. Even providing access to independent financial advice, or signposting external digital platforms / modellers which present tailored information to members based on members’ data / responses to questions could potentially result in providing regulated advice, for which the Trustees could be held liable if the member suffers a loss.

Further, Trustees must also be cautious in sending what they consider to be helpful information to members by the Privacy and Electronic Communications Regulations 2003 (PEC Regulations) because those regulations restrict the provision of direct marketing by electronic means.

Government proposal

The Government says that the PEC Regulations and other consumer protections should not get in the way of the 'free and fair functioning of the pension system’, to improve member outcomes. In particular, the DWP is working with HM Treasury, the Financial Conduct Authority and Information Commissioner's Office (ICO) on potential solutions.

What should Trustees do differently?

Nothing. Pending clear guidance / legislative, given the low threshold for what constitutes advice*, Trustees should remain cautious in communications with members. Communication should be neutral and convey only factual information.

*to count as advice, personal recommendations do not need to be given, so any encouragement, inducement or persuasion to take a particular course of action in respect of a specific FCA-regulated product could amount to advice.

Trustees can rely on the fact that they do not currently have a legal duty to provide advice to members about their pension rights and options, and this is outside the scope of their fiduciary duty to act in the interests of all members.