We all love someone, right? And obviously, don’t be dying anytime soon, is quite an appealing ethos. But this is a big ‘do something now’ message to trustees, IGCs and providers.
The vast majority of us in the UK are on a pension accumulation journey, unaware that we have not nominated our ‘somebody to love’ – in other words, we haven’t nominated any death beneficiaries on our hard-earned
pension funds.
I assumed it was just ‘one of those things’ that maybe just I was encountering in pension governance meetings, when they really started having positive and impactful change discussions during the last decade. One of my clients is a large oil and gas sector employer. They are all over health and safety and their head of people said to me ‘this extends into ensuring my people’s affairs are in order on death – so anything less than a 100 per cent death nomination form completion rate is not acceptable to me’. I loved this. At the time, we had just reported that only 6 per cent of employees had completed the process.
We explored why and concluded four things. Firstly, that people think by joining a company and completing an expression of wish form for their life cover, it extends to their pension. To be fair, in the larger trust-based schemes, this is true – but sadly this is very much not the typical workplace scenario anymore; secondly,
that the mass DC market behaviour of sending paper-based death nomination forms amongst all the other guff they distribute to new members is often lost or not seen; thirdly, that people think if they have completed nominations before, with a previous provider at the same company or a former employer even, they migrate to the current scheme; and finally, that it isn’t needed – the money will go to my partner automatically, right?
At governance meetings, this client now rejoices that they still have a 100 per cent death nomination completion rate. So, how did they do it? Simple – they worked with us and the pension provider in identifying who hadn’t done so and made it mandatory for the employee to return it. They also hounded them. They include it now in the new employee checklist. Job done? Nearly – the pension provider in this case has a great web dashboard for members. This has a clear area where death nomination forms are stored. But if you click on it, the member can’t see who the recipients are.
So, there is still work to do here, to ensure that members keep their selections current.
Why is this so important? According to a lawyer pal of mine, there are millions of pounds of pension death assets currently being left to people we used to love. We all love somebody – but it isn’t always the same person forever – so we need to make sure our declared recipients are up to date.
We ensure that death nomination form completion is high on the agenda in governance meetings. And it is pleasing when we see the numbers rising. But we were so disappointed with the providers in this space that we conducted our own research. I thought this would be simple and easy to do, but it has taken three months and the results are still limping in.
Here are our findings so far. Less than 25 per cent of pension members have completed a death nomination form – this simply isn’t good enough. Non-completion of a form delays settlement of the fund to the loved ones. Furthermore, providers don’t seem to be able to report on the completion rate per scheme automatically, and they don’t seem to care.
I also believe ICGs and trustees have no idea how bad the issue is – they are too far removed from the members on this point. Death is a member outcome. The current status quo delivers a very poor member outcome.
Our quick fix is to identify the problem on every scheme at consulting level, then work with the employer and the provider to address it. We also need to pressurise providers and trustees to make this a higher profile area – for example, have it as a flashing neon item when any member logs in via the desktop site or app – ‘warning – death nomination form needs completing’ – and we also need to keep talking about it in governance meetings
This really shouldn’t be a problem that needs fixing. But it is. So let’s talk about it more and ensure we put this one behind us quickly. Wake up providers, trustees and IGCs – all is not well.