Covid-19 has forced change in every walk of life, but has shown how quickly humans and technology can react and acclimatise. Something I have now heard numerous times along with “We’re living in strange times” is “Isn’t it crazy how quickly this has become normal?” This change in mentality shows that companies and individuals are resilient and far more adaptable than anyone could have imagined in the face of an unprecedented world crisis.

In a matter of days, the UK pensions industry has had to move from a traditional and visible working environment of office-based employees, working nine to five, to employees working remotely from home, something that until now has been considered a luxury, only available to those who could be trusted. Despite huge strains on IT systems to move entire company workforces to remote servers, and vast adjustments in operational delivery, the industry appears to have coped with the unprecedented disruption to work life. A survey found that “62% said that Covid-19 is having little impact on day to day running of their schemes”[1], up from 39%[2] reported in a survey taken in March 2020. Such findings demonstrate how confidence has grown since the initial panic of the UK going into lockdown. However, there are many other challenges to contend with that accompany remote working: fitting work around caring responsibilities and home schooling, the need to self-isolate for those experiencing symptoms (or living with family who do), and the need to work alongside husbands, wives and partners in other sectors, to name just a few. Such factors make it harder to focus on work at home.  

Throughout this lockdown, the Pensions Regulator’s (TPR) main concerns were: 1) that pensions continued to be paid, 2) that beneficiaries be set up on time, and 3) that contributions were collected and invested in a timely manner, despite the obstacle of investing in a volatile stock market. TPR have confirmed that all the schemes they have reported on have met these goals along with meeting their Standard Levels of Agreement (SLAs) for member queries. They also report that measures are being taken to ensure that smaller companies are also able to keep up with larger administrators, who have more resource.

Changes in operational delivery have been crucial to allow necessary administration tasks to be completed. Pension administration processes are complicated, and tend to be dealt with in timely stages. To give an example scenario: a member may receive a hard copy retirement quotation from a pensions administrator, then take time to select their option, possibly after seeking financial advice. They may then return their option papers, along with their personal certificates, to be validated by the administrator, which are again returned to the member, usually by registered post. At this stage, yet more time is required, as fund value disinvestments may be required with ‘wet ink’ signatures from Trustees and partners that may be located in different regions. Finally the pensions may be set up and tax free cash paid out and a final communication sent to the member. All this is often completed in what can seem to the member like unapologetic and laborious bureaucratic processes. Covid-19 has caused many pension schemes to take quick action in progressing member online access set-ups, secure document exchange and online ID verification. Companies that pride themselves in their personal touch in using ‘wet ink’ signatures, as well as fund providers that insist on it, have been forced to adopt modern techniques, such as electronic signatures and other approved alternatives, in order to facilitate disinvestments, to help Trustee decisions and large investments be moved more rapidly.

These changes have shown that alternative processes are available, which are often quicker, cheaper and more favourable in the long run and we are unlikely to see pension schemes, and perhaps more importantly, members, want to return to previous, inefficient processes. We must remember, however, that there are challenges to overcome with new processes, and particularly in working remotely to complete them, such as fraud, cyber risk and ensuring the data protection of members’ financial data. Employers will need to ensure that security programs on laptops are up to date and that training and finite checks are rolled out to effectively use new document sharing and electronic signing. Action Fraud have reported a “400% increase in Coronavirus-related fraud reports just in the month of March 2020”[3]. This is a worryingly high increase that comes at a time where individuals may feel desperate in accessing money to subsidise lowered income. TPR have attempted to tackle the potential threat of pension transfer scams by requesting schemes send new warning letters to members upon transfer requests of DB pensions, and have even allowed pension schemes to put a temporary halt on transfers. Clive Harrison, partner at LCP says that ‘“A key challenge will be to ensure that scheme members can access balanced and affordable advice, especially if they are motivated by short-term financial pressures”[4]. Pension schemes must be prepared to ensure Trustees are sufficiently educated to help and engage with their members to help them make the right decision in accessing their pensions.

Some schemes have had to take up the option to defer contributions, an easement process brought in by TPR. Professional Pensions recently confirmed that TPR have extended this deadline, which highlights the continued uncertainty for the UK pensions industry and economy.

Jill Ampleford, partner at LCP advised that it “will be vital to get things back on track once the crisis is over so that a realistic plan is put in place to deal with the shortfall in the pension scheme, particularly as this could have materially increased due to changes in financial markets”[5] and schemes should try to get back on top of contributions as soon as possible with Steven Taylor, also a partner at LCP, adding that “most employers will not take this step lightly and will do so only when other avenues have been exhausted.”[6]

In terms of communication, Covid-19 has revolutionised people’s attitudes to video conferencing. Previously it would have been seen as a last resort alternative to face to face meetings, and considered impersonal. During Covid-19 it has been a lifeline as people have discovered that you can still hold transparent conversations online. Not only that, individuals are using video calls in their personal life too, for quizzing with friends, reading stories to their grandchildren and keeping in touch with loved ones. The awkwardness many would have felt previously is dissipating and there is a realisation that the technology is more than adequate. Video calls will save companies huge amounts of money in travel costs and productivity can be significantly increased with the removal of ‘dead’ time for staff to travel to meetings attempting to use poor Wi-Fi on trains.

It is true that some people will want to return to traditional face to face meetings. Nevertheless, video calling has lost the negativity previously surrounding it and many have appreciated and become accustomed to the advantages of the flexibility they bring, and the time they save for all parties. Where money has had to be spent in tackling Covid-19 there will be some cost saving to UK wide companies to recoup from travel expenses.  

Beauty parades at client tender stage and site visits to meet prospective pension administrators can effectively be undertaken virtually, and rehearsals for virtual site visits have indeed happened at Barnett Waddingham, proving that TPAs can still gain new business despite the restrictions of the Covid-19 crisis.

The PLSA survey is useful and suggests a good new story for the pensions industry, but it is limited since it compares two brief periods in lockdown. It is still too soon to know the full impact of Covid-19 on the pensions industry. The uncertainty around when lockdown will end and whether there will be a second wave of the pandemic forcing us back into another strict lockdown, prevents us from estimating how the pensions industry may continue to cope with newly adopted procedures.

As mentioned earlier, the priorities to date in the pensions industry has been to ensure that: 1) pensions continue to be paid, 2) beneficiaries are set up, 3) contributions are collected and invested in a timely manner and 4) member queries are answered. It is right to focus on these member events and as Pensions Administration Standards Association (PASA) says, “in these extraordinary times, making sure pension schemes deliver promised income to members is what matters most”[7] However as David Fairs, Executive Director of Regulatory Policy, Analysis and Advice for TPR, has pointed out[8] there will be a need to start readdressing strategic projects such as diversity and inclusion on Trustee boards, climate change and Environmental Social and Governance investments and the long anticipated Pension Dashboard which will require pension schemes to submit digitised data that is ready to go.  Therefore employers will need to putting these issues back on meeting agendas and dedicate more time to thinking about these issues, as well as how to prioritise and implement them amongst the crisis of lockdown. Employers and Trustees will need to find ways to ensure they continue to serve their members as well as proceed with other plans.

The PLSA survey results suggest that the industry is coping but only half of the schemes who responded believed that “current operational procedures were sustainable for six months or longer and a small number (8%) of pension schemes said they will not be sustainable beyond three months”[9]. This suggests that schemes will want to return to old procedures and that there is a lack of confidence in new operational processes. Perhaps though, it simply means more time and attention is needed to ensure new processes can withhold the pressure of working in a new world.

The changes to working practice, operational delivery, and communications in the pensions industry shows that companies, trustees and administrators can work together to provide resources and clearer communications for their members. It show that outdated processes can be replaced by more efficient, technically advanced ones. Companies may have to readdress cashflows and consider spending on new infrastructure but they are also likely to save money in travel expenditures, overnight accommodation and the loss of unproductive time travelling between meetings.

The speed of change since restrictions were imposed tells us that we have resilient workforces, robust technology already in place and suggests that we just needed a push to make it happen. It perhaps highlights that many of the ‘traditional’, nice to have rules and formalities in the pensions industry are long outdated and that favoured traditional practices actually have superior, modern alternatives.

It also shows that our pension scheme members have an understanding of the crisis, and that as long as administrators are transparent in setting expectations, they are accepting of the unprecedented situation. In the same way we are seeing community spirit in the general public, there is a sense of empathy that is extended even in a customer and service transactional experience.

Covid-19 is an unprecedented world crisis, but I would argue that the pandemic has highlighted the need for a push in changed practice and the pensions industry has responded at speed with creativity and resilience. It may well be that new processes require further attention to ensure they can continue beyond lockdown, but the stepping stones are now in place. Realistically, there will be habits that return, tender presentation and site visits may be possible via video conference and an effective tool during lockdown, but it is likely that trustees and employers will want these types of relationships and introductions to be developed in person when it is deemed safe to do so.

The pensions industry is at a crossroads in terms of how to continue. There are many challenges with pursuing the new opportunities posed by Covid-19, such as cultural resistance to technology for financial matters in the pension-drawing age category and the preference for traditional ways of working that have been shown to work for decades. But the new opportunities may make the industry more efficient, more responsive, and more flexible and better all round for members and employees.