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Murphy Lives On - some observations on complaint handling. Paul Kenny The Pensions Ombudsman. When a complaint is made…. Does the Complaint handler…. Lend a sympathetic ear? Attack the complainant? Reach for their Lawyer? Call in the PI Brigade? Actually look for the facts?

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Murphy Lives On - some observations on complaint handling

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when a complaint is made
When a complaint is made….
  • Does the Complaint handler….
    • Lend a sympathetic ear?
    • Attack the complainant?
    • Reach for their Lawyer?
    • Call in the PI Brigade?
    • Actually look for the facts?
    • Agree that he has a case?
    • Apologise?
    • Refer the complainant to IDR?
no standard response to complaints
No Standard Response to complaints
  • Responses vary according to the “complainee”
  • Insurance companies are generally good – positive response, quick to acknowledge failures
  • Intermediaries vary
  • Trustees and Employers sometimes hide behind each other
and the complainant
And the Complainant
  • Some people are their own worst enemies
    • The nit-picker
      • When he cries “wolf”, nobody listens any more
    • The Chip on the Shoulder
      • Not again!
    • The Worrier
      • But it might happen….

…to name but a few

  • Don’t be tempted to batten down the hatches and hope he’ll go away – he won’t
  • Don’t treat complainants as dangerous lunatics
  • Do acknowledge the complaint and treat it seriously
  • Do try to deal with it as quickly as possible
  • Most people who complain really do feel aggrieved
  • Many feel they have a strong case
  • They may not be correct but should be handled with respect
    • Even habitual complainers
  • Real “chancers” are rare enough
an apology
An apology?
  • Remember that sometimes an apology is enough (“it’s the principle…”)
  • Complainants need to feel they are being listened to
  • Failure of the scheme /administrator /trustee to reply will escalate the problem
  • People who feel they are not taken seriously feel aggrieved
    • And complain to me
one little word
One Little Word
  • A missing word – a missing clause
  • “… because….”
  • Many complaints could be avoided by giving an adequate – or a clear – explanation of the reasons for trustees’ or employers’ actions

More confusion and more complaints result from poor communication than from almost any other single factor.

When a complaint arises, keep the lines of communication open

compliance with disclosure requirements
Compliance with Disclosure Requirements
  • Most schemes are generally compliant, though there are always some problems
  • The requirements are straightforward (if potentially expensive)
    • Meeting them can be a problem!
    • Because of the weight of regulation, temptation is to tick boxes without regard for clarity of the message
perils of communication
Perils of Communication
  • “You should keep this booklet in a safe place for future reference……”
  • That’s all they ever do
  • The Golden Rule of Pension Communication:

Nobody Ever reads thesmallprint

public service schemes
Public Service Schemes
  • Generally suffer from poor communication
    • Worse as you get further from the centre
    • Circulars often incomprehensible – but very accurate!
    • Incomplete information, e.g., contributions to be repaid
problems i shouldn t have
Problems I shouldn’t have….
  • Some “complaints” can be disposed of quickly
  • I should not have to write to a complainant explaining the true meaning of a “communication” from scheme trustees
    • But it is the quickest way of closing the matter down
problems i can t solve
Problems I can’t solve
  • Refusal of Early Retirement
  • Decisions to discontinue/ wind up
  • Conflict between scheme rules and employment contracts
    • (if the latter exist at all)
  • Shortcomings in scheme design, if the trustees have kept the Rules
design flaws
Design Flaws
  • Sometimes it’s not the administration of the scheme at all, but problems arising from the basic design of the scheme.
  • I can do nothing about bad design - though there have been some ex-gratia offers to complainants, where it is clear that the problem should have been foreseen
frequent complaints design flaws
Frequent complaints (design flaws)
  • Integration and the way it is applied
    • When pay doesn’t exceed State Pension increases, FPS goes down, but historic contributions were on higher rates
    • Pay based on basic, benefits on pensionable
  • Final Pay
    • e.g., three-year average for computing benefits but contributions based on annual pay not averaged
  • Contributing for more than 40 years – is there an equitable solution?
some pitfalls of design db examples
Some Pitfalls of design – DB examples
  • Lack of flexibility – e.g., in death in service or retirement
    • Can we divert to non-spouse or same-sex dependant? Not in the public sector –ever
    • Must they have been married before retirement?
    • Cesser of benefits on remarriage/ cohabitation?
    • Have they even thought about separation and divorce?
  • Did the actuary assume people would commute benefits?
    • It may not happen now…
  • Members contribute for more than 40 years
    • And complain bitterly
db pitfalls continued
DB Pitfalls, continued
  • Unqualified statements – e.g., right to retire early
    • Consent of employer, trustees?
    • If no consent required, are benefits in danger?
      • S59G power helps, but only since 2005
  • Late retirement: increases in deferment – may not apply to AVCs or other DC component
some pitfalls of design dc examples
Some Pitfalls of design – DC examples
  • Same contribution regardless of age at entry or point of change of scheme
  • Employees may bear all expenses
    • regulation now very expensive
  • Risk “First Charge” on contributions
    • Depletion of the fund
  • Risk of inadequate benefits
    • Results won’t be known for years
  • Risks of poor communication
risk as a first charge
Risk as a First Charge
  • Schemes where risk is a first charge against small DC contributions can be a problem
  • Members don’t understand (and are rarely told) that increasing risk premiums may wipe out the contribution in due course- and then begin to eat up the accumulated fund
    • Salary increases will speed up the process
    • Accumulating fund not set off against risk benefit
  • Some intermediaries don’t understand this problem either!
target benefit the risks
Target benefit - the risks
  • How was the target communicated?
    • Is it clear that the scheme is not a DB scheme any more?
    • Is member still in DB mode?
  • Did the scheme just continue the same contribution rate?
    • Won’t buy the same benefit, but member thinks it will
some pitfalls of design target benefit
Some Pitfalls of design – Target Benefit
  • Is it clear that we have changed from DB to “target” – and that “target” means DC?
    • What are expectations now?
    • Do they understand what DC means?
  • Are we clear about reviewing contributions?
      • Timing/frequency of reviews
    • Have we kept the promise to review?

- In other words, how well have we communicated?

the challenge of the hybrids
The Challenge of the Hybrids
  • Hybrid schemes present new challenges to good communication
  • Most consist of DB and DC elements
    • -within the one scheme
  • There is no scope for shortcuts
  • Effective communication may cost more, but it’s less expensive in the long run!
and finally
And finally….
  • It is possible that there is too much regulation
  • What’s not needed is more of it
  • What is needed is compliance with and enforcement of what is there already

- And don’t forget the Green Paper!