How to handle your pensions problems

Making decisions about pensions will never make an FD popular, but there are right and wrong ways to go about it, says Chris Harris of Cipfa

The word 'pensions' is rarely accompanied by good news, whether we are thinking of our own situation or dealing with a work issue. When I trained as an accountant, pensions were hardly mentioned. Robert Maxwell was still a respected newspaper owner at that point, not a thief who had stolen from his company pension fund.

However, in the past decade or so the spotlight has been strongly focused on pensions and they seem to wilt continually under scrutiny. Every time we look at them, the value seems to have gone down and the cost to have risen. Unfortunately, responsibility for dealing with the problems this causes normally lands on the desk of the finance director - trained or not.

Here is a checklist of steps to take on the way to ensuring that the pension arrangements for your organisation are fit for purpose.

The Latin phrase cui bono? - who benefits? - is a useful place to start. You need to understand which groups of people benefit and by how much: pensioners, deferred pensioners (former staff who have not yet taken up a pension), active members (current staff), potential future staff, pensions administrators, investment managers and actuaries. You should benchmark the results for each group and look at whether each stakeholder is receiving the level of benefit that is best for the organisation.

Some matters might appear to be fixed for the time being, especially if you are part of a multi-employer scheme. However, in the long run everything is negotiable, so it is worth identifying short, medium and long-term options.

Pensions are above all a people matter. So make sure that any changes are clearly communicated, with an emphasis on face-to-face contact, and ensure that the HR team is fully briefed on the issues. It is worth establishing a sub-group of trustees, staff and relevant directors that can be used to review any changes on behalf of others. Most pension decisions will be unpopular, but staff bear with you if the process is transparent and fair.

It's also vital to appoint good advisers. The good ones will have reputations, so ask around other charities with similar issues. If you cannot understand an adviser, do not assume it is your problem. It is their responsibility to have sufficient mastery of their subject to be able to explain it at any level.

Finally, get some personal training as soon as possible. Most pension advisers provide one-day courses that cover the basics, and there are networks that provide pension advice for organisations not big enough to afford to retain advisers.

 

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