Pension scammers could use market volatility to strike, warns regulator

Posted on October 12, 2022Comments Off on Pension scammers could use market volatility to strike, warns regulator
P

ension scammers could seize upon the current market volatility as an opportunity to strike, the Pensions Regulator (TPR) has warned.

The body, which regulates work-based pension schemes in the UK, set out actions that pension scheme trustees should consider to shore up their positions before the end of the Bank of England’s emergency bond-buying scheme on Friday, and in the near term.

Setting out its expectations for trustees, the regulator said: “Market volatility often presents opportunities for scams, and trustees should remain vigilant and follow best practice in this area.”

Trustees should also monitor the appropriateness of assumptions used in calculating pension transfer values, it said, as these could be impacted by the recent market events.

(Pension scheme trustees) should have robust procedures in place to help them respond to changing circumstances, make decisions and implement them where the need arises

The regulator also said it encourages trustees to engage with their investment advisers, so they can focus on and prioritise the key areas of concern.

It added: “Recent events have shown how important it is that trustees are able to act quickly when needed.

“They should have robust procedures in place to help them respond to changing circumstances, make decisions and implement them where the need arises. Consideration should be given to whether adding one or more professional trustees would help in these circumstances.”

A gilt rout has particularly affected defined benefit (DB) pension schemes, such as final salary schemes. These schemes are often described as “gold-plated” because they promise members a certain level of income in retirement, based on their salary.

A key challenge for DB schemes has been the ability to access liquidity at short notice, in an environment when long-term interest rates rose rapidly in just a few days, the regulator said.

Members of defined contribution (DC) schemes, meanwhile, may have experienced a reduction in the value of their savings, particularly if they are invested in gilts, which have fallen in value as yields have risen over 2022, the TPR added.

DC savers tend to have a higher allocation to gilts as they approach retirement – so some savers close to retirement are more likely to have seen a greater fall in the value of their savings than members who are further away from retirement.

But for people looking to buy a retirement annuity, higher yields will also likely lead to improved rates, the regulator added. Annuities give people a guaranteed retirement income, often for the rest of their life.

The regulator said: “Individuals considering purchasing an annuity may find that they can achieve a materially higher pension as yield changes feed through to annuity rates.”

Source link

Comments Off on Pension scammers could use market volatility to strike, warns regulator