* Customer service is still a problem for pension funds in Ireland, according to a leading figure in the sector, despite good progress in moving to a master trust regime that provides better customer protection.
The comments come in the wake of a new report on the growth and potential for master trusts — new pension structures where a small number of trusts each manages the pension assets of many employers rather than every company running their own scheme. The new structure, which came in under an EU directive, is designed to provide better governance and protection for Irish workers’ pension pots.
But communicating with pension scheme members in plain English remains a challenge.
“The whole thing remains quite confusing for customers who expect to be able to get their money when they want it,” he said.
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He cited the example of someone approaching retirement who was opting to take an annuity — a guaranteed monthly pension payment for life — when they retired. The price quoted by any of the insurance companies that sell such products will be valid for only 10 days as they are based on market interest rates which are constantly changing. However, the pension administrators can take between six and eight weeks to provide the details of pension benefits payable.
That means you are effectively going in blind, opting for a pension when you do not know what the actual payment will be.
The industry figure says master trusts need to work harder on the customer interaction side of the business.
In another example, he referenced a client who had spent 37 minutes on a helpline to a master trust provider. Three days later, the trustees of that master trust had put out a report on its performance without a single mention of customer service.
A report from PwC earlier this week said Ireland’s master trusts are likely to become an ever more dominant part of the Irish pensions landscape, despite some initial growing pains.
“It’s only going one way”, said PwC pensions partner Munro O’Dwyer. “The first mover group is done. We are now seeing bigger stand-alone schemes moving their money into one of the 17 master trusts currently in the Irish market. They will require higher standards and that will be a virtuous cycle for all master trust scheme members.”
PwC also expects that, although there are points yet to be resolved with the regulator, there will be growing pressure for the introduction of the ability to draw down your pension without leaving the master trust.
“At the moment,” Mr O’Dwyer said, “people who are retiring move at that point to the retail market”.
Were they to stay in the trust and simply draw down their pension it would be to the advantage of a lot of scheme members, he said, noting that costs to the pensioner would be lower for in scheme drawdown than they are in the market for approved retirement funds.
The scale of master trusts also allows them to invest in riskier assets for longer than a smaller retail fund would be able to justify, he said, as well as investing in some classes of assets that would simply not be an option.
* This article was edited on Tuesday, May 7th, 2024
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