The member experience implications of a buyout

The roundtable – chaired by PP editor Jonathan Stapleton and held in association with Pension Insurance Corporation – discussed the member experience implications of purchasing a bulk annuity, from the initial buy-in stage and through to buyout at which point the insurer takes over the administration of the pension scheme.

It focussed on the implications of a buyout for the members, the key considerations to achieving great member experience and developments in this area, including technology and assisting vulnerable customers.

Panellists also discussed the priorities for trustees as well as the experiences they have had in this area.

What are you looking for when it comes to member services in a bulk annuity transaction?

Alan Pickering (BESTrustees): The journey to buy-in or buyout can be quite tortuous for members moving away from a familiar employer brand name to a less well-known name. I want people to have a seamless voyage to their ultimate home and then a very comfortable journey while they live in that home. If we cannot get the admin right, what faith are they going to have in some of the more technical stuff that we do, which is making sure they are paid the right money at the right time and have someone there to talk to?

Matt Race-Pridding (Zedra Governance): A complete lack of anxiety is what I am looking for. It is difficult for members to move on from somewhere they know to somewhere they do not necessarily know as well. We are looking for a seamless transition as well. If one thing goes wrong, it will colour the members' view of how they see the insurer and you can lose that trust instantly. It is all about that initial bit – getting a member on board and making them feel like they are part of the process and that the trustee is doing what is right for the member, not just what is right for the company.

Kim Gubler (PASA): The experience of buy-in has changed. At one point, buy-in was just a different type of investment but now insurers want to be involved in calculations. You are still within a service level agreement (SLA), because it has gone out to a third party, but from the members' point of view, you have extended that end-to-end and some have had a terrible experience.

From an insurer perspective, I would want them to be always thinking about the end-to-end experience. It takes years to build trust, a moment to lose it then years to build it back again. If your communication is right all along the way and you introduce people to a change of brand, they can build up their knowledge, as long as that experience is good.

With technology and modern platforms, you can use behavioural analytics to know the right time to communicate. We need to move on from thinking of administration as a bureaucratic task and understanding that it is supportive of how pension scheme members feel about their relationship with their pension.

Michele Hirons-Wood (Capital Cranfield): I think what members are looking for is consistency across their lifetime and ease. Most members just want to get the information they ask for within a reasonable time frame. They want it to be easy to understand and they want to have their pension paid on time. It is very different in the defined contribution (DC) space, but in the defined benefit (DB) space, members just want simplicity, ease and confidence that they will get their pension paid correctly and on time.

Arlene Mitcham (AMNT): A key aspect is to engage with members and be part of what is important to them. For instance there are various augmentation aspects which could play a part in the negotiation with the insurers – there are certain areas where you might want to protect the additional things that members get.

Also, you should understand your membership base and look at it from an inclusion, diversity and fairness perspective. Get that reported to you as a trustee board and see whether you have an opportunity to tailor the offering.

I work on an 80-20 model. Where 80% of our members will be fine if we have a good experience and communication, my concern is for the 20% where, even if we do all of that, their experience may not be as good.

James Duggan (Vidett): From a trustee perspective, we always talk about scheme journey planning, but there is also journey planning from a member perspective, and in particular communications. Making members aware that a transaction is coming so they are familiar with the brand of the insurer is as much a trustee responsibility as it is an insurer's responsibility.

The key thing is to make sure you communicate with your members properly, explain what is happening, and try to introduce these things as early as possible.

Adrian Campbell (Dalriada Trustees): When we transact with an insurer, we want to engage quickly on a project plan so we can communicate the timeframe to members as soon as possible.

Being appointed as sole trustee to a scheme, can be a concern for members and some members may feel we are in cahoots with the employer, so we need to break down the barriers of clearly telling members what all this is about and being open within our comms so members can talk to us – it is not just a letter, we have direct lines of communication with our trustee teams so that members can call us and ask questions.

Daniel Barlow (Law Debenture): We talk about the member experience a lot. When the rubber hits the road, how important is it? When you are thinking of transacting, member experience and administrative capabilities are one of a number of factors, but are they the most important? It is often said that price would trump the member experience or administrative capability.

Deepash Amin (PIC): As an insurer, we become the direct contact for the member at the point of buyout. Up until then, our contact and any communication with them is via the trustees. As such our main interaction during the buy-in phase is with the trustees and the administrators, but we do try to help the trustees bring the members along the journey to reaching buyout. While we agree that there might be some extensions to SLAs, and we need to fit in, our role is to make sure that we are as supportive of the trustees as we possibly can be during this time – helping with member communications where appropriate, answering questions promptly which they may have received from members, and so on.

Pete Rennalls (PIC): The trustees' view of their members is important. While we know what the buyout journey is going to look like, we have often found that certain trustees know their members really care about one benefit feature, like additional voluntary contributions (AVCs). We can then jointly reassure them in our communications that these small important features are still being captured.

Does brand matter when it comes to member experience and communication in buyouts?

Matt Race-Pridding: It is about track record. There have been new entrants this year and there will be next year. You might think there's lot of choice, but these new entrants do not have a track record or brand recognition with members.

Kim Gubler: The thing is that they might have had a bad experience with that particular brand.

Matt Race-Pridding: Yes… If they failed to pay out on your house insurance, you won't trust them with your pension.

Kim Gubler: It is about being aware of what that member experience is. There are a number of stakeholders that are involved but, as trustees, do not just listen to your advisor. Do some due diligence or a site visit. I know the net promoter score (NPS) can be massaged to a degree, but do look at those kinds of metrics. Do not just take an evaluator's word for it.

Alan Pickering: I did a site visit on one of my schemes with the MNTs and they were really interested in the employment practices of the chosen insurer. I have not found many intermediaries who home in on employment practices. They might have a checklist, but inclusiveness goes beyond that to the whole ethos of how they treat their employees because that might be an indicator of how they treat their customers.

Kim Gubler: We look at treatment of employees because, if employees are treated well, they will be more disposed to treat members well.

And, if you look at PASA accreditation, there is a big section there on people. A member is very unlikely to talk to the actuary or investment consultant. Generally, they will talk to the administrator at a vulnerable point in their life. You need to make sure that the people they talk to have been trained in customer services as well as technical matters.

Arlene Mitcham: Also, members' financial vulnerability so they deal with it appropriately. It comes back to the human side of the business.

It will be interesting to see, when boards look at what options they need to have with regard to discussing with potential suitors, whether they have done a financial vulnerability assessment of their membership and are taking that into account in their decision to go for buy-in or buyout.

Daniel Barlow: Just on the brand recognition factor, employee benefit consultants will rate that alongside other factors when they assess the different insurers. In a recent transaction, we picked the two best quotes based on price then there was a choice between them. Trustees took into consideration that one is a well-known brand name, which we felt members would have more confidence in.

What work are you doing around vulnerable customers?

Pete Rennalls: We have done a substantial amount of work over the past couple of years, including adopting new technologies not previously available, and partly as a response to Consumer Duty. We have identified around 15% of our population as potentially vulnerable, but we know statistically this should be much higher. What has changed over the last few years is the growing definition and education around vulnerability – it might not just be a lack of financial education or being hard of hearing, it might be that English is not someone's first language or something else entirely.

We have done a lot of education around the fact that they are not going to speak to the actuaries or the advisors involved in the transaction, they are going to speak directly to our specialist call handlers. We provide a lot of training on how to identify these vulnerabilities and how we can then offer help or signpost additional support.

In addition, AI voice analytics has really improved over the last year. We [via our third-party administrators] are now able to analyse calls in real time and pick up on subtle things like pauses. The pensioner might say, ‘I did not quite catch that', voice analytics then brings it to the attention of the call handler.

Technology is also enabling us to capture data points over time and look at customer experience to recognise when, for instance, if we get an issue every time there is a bereavement, meaning there must be something wrong with our bereavement process. Technology and regulation are helping us have greater insight, so we can improve the service that we offer.

Kim Gubler: Consumer Duty and its requirement to treat people fairly and make sure they understand what they are being told has not bled into the trust-based space yet, but, probably through secondary regulation, it will naturally do so. There is concern that everybody is looking at making everything great in the trust-based space, but through risk-reduction transactions, a significant number of DB members are going to be ending up in the insurance-based space, with a completely different set of regulations. We need to look at what extra protections there are and make sure that people are aware of that.

How can insurers improve member experience and help members throughout the whole trust journey?

Adrian Campbell: It is about communication and working with the trustee to send out easily understandable comms at various points through the transition. It is also about having SLAs in place that are kept to and, if the service receives complaints, the insurers need to deal with those effectively and keep the trustee advised.

Other than that, if the member had access to portals or mobile phone apps prior to the transaction, that service should remain when they transition to the insurer. There is now a large expectation from members that they have ready access to their pension benefits and can see for themselves what is going on.

Michele Hirons-Wood: Providing comfort to members and trustees is important in that transition phase. Once the scheme has been wound up, the trustees have no more oversight so they need to understand the ongoing member experience. To illustrate, trustees may not be aware of the frequency at which factors change following buy out. To make sure it does not come as a shock to members, trustees need to understand what do the member option terms look like and how different this might that be from what members are expecting?

James Duggan: Often as part of the initial buy-in transaction, we tell members not to worry because none of their benefits have changed, but in practice they have. Most pension schemes update their factors every three years. When you have periods of market volatility, you see significant changes in some member quotes. If a member is coming up to retirement, it might be guaranteed for three months. You should get financial advice to understand fully what your quote says and then return that paperwork. If you are outside of that time, it is going to be recalculated on more up-to-date factors. That can have a serious impact on the final benefits the member receives.

Alan Pickering: My message would be that everybody messes up. If you mess up, I am not going to crucify you. If you do not fess up, you are ruining my reputation and yours. If you look at the news, all the bad publicity is where it has taken somebody a year to own up to making a mistake and a year to put it right. If you mess up, fess up. Tell everybody concerned and try to learn the lessons as quickly as possible.

How important is communication as an insurer going through a buy-in, buyout process?

Deepash Amin: It is very important. We work with trustees to communicate with members while in the buy-in phase to bring the member along that journey, particularly prior to moving to individual policies. They should not suddenly be getting a letter on the day they become a policyholder to say, ‘Your pension is now coming from PIC', an organisation they may not have previously heard of.

We provide Q&As so they feel comfortable when PIC takes over the administration and are fully aware of who we are and what has been secured. Once we have taken over, it is important to use plain English. The language of pensions can be very technical, with a lot of jargon. We make sure to minimise that as much as we can.

We also allow them to interact with us in the way that suits them best. From talking to a special call handler on the phone, to using an app or email and everything else in between. They can use the mode of communication with which that they feel most confident in communicating with to us.

What are your key takeaways or concluding comments from this discussion?

Daniel Barlow: I do have one thing. I have a slight bugbear with time-based SLAs. I want to see SLAs measuring more than time. I want to see them measuring the customer experience. I think there are ways that you can do that through feedback, net promoter scores and end-to-end reporting. I am not really fussed about time-based SLAs on their own. I want to see you measuring the customer experience in a quantitative way. If it is not measured, it is not managed.

Arlene Mitcham: From a member perspective, we need to educate them. We need to let them know what the end product will be and members need to understand the security related to that and the reasons why we are doing it. If there are any limitations around this for members, then we need to communicate and make sure they understand that as well.

Matt Race-Pridding: I would probably just go back to what I said at the start. Admin is the hardest part of pensions. Do not expect everything to be done right 100% of the time. I want to see insurers doing their very best to make sure it is a seamless transition – I know that, to some extent, trustees have to crystal ball it about how their members are going to be looked after once they are gone so due diligence before is absolutely key.

Adrian Campbell: I have a couple of points. I think what Arlene said about considering the membership and vulnerabilities, etc, really resonated with me. There is more work that we could all do in that regard when we are considering a transaction. Secondly, I think there is still a way to go in communicating more effectively with members and working with the insurer on that.

Kim Gubler: I would like to see the insurers using technology more for analytics. When it comes to communication, you cannot just say, ‘communicate better'. You have pensioners who have completely different communication needs to those who are yet to retire. Within those pensioners, you may have an ageing population that need a different kind of reassuring message compared to those who have recently retired.

We need to use technology to understand behaviour, to understand what people are doing and why they are doing it, and then match the communication to that. We are moving into a hyper-personalised world. If we can make our communications relevant to the individual, they will listen to the message that we give them.

James Duggan: I think there is a degree to which we trustees need to look a little bit more at ourselves and think about what we can do to help improve this process from our members' perspective. Kim mentioned some deferred members may not receive any communication from their scheme for a number of years. Can we start thinking about how we communicate with all members earlier on in the journey? It might be something simple like a newsletter to make members more aware that the pension scheme is there, so they are a bit more familiar with it. When you do start to communicate a bit more around the buy in and buyout, they will then be expecting it and it will not be a complete shock for them or make them think it is a scam.

Alan Pickering: From the insurer's point of view, I think the key word is engagement. From the very moment you become the preferred supplier, I think there should be people within insurers who are thinking, ‘Who should we be engaging with? How should we engage with them?'

Also, we shouldn't close down the engagement with the former employer or the former trustee to the extent that they want to be involved. Those people will be your brand ambassadors. If someone goes to them and they are aware of what is happening and why, it can help provide comfort for the member.

Michele Hirons-Wood: For me, I would like to see consultants doing much more detailed due diligence on the admin before the buy-in stage and, importantly, taking trustees through this aspect in more detail. Not just taking an approach where they say, ‘Well, they are RAG-rated green. Because they are all green, we do not need to worry about it'. I think trustees have a role to increase the standard of that advice.

Pete Rennalls: It is really key to have a partnership with the trustees right at the outset on planning the engagement with the membership throughout the process. When we have that, I think it goes really well. If we lose that engagement from either side, I think we lose a lot of the really nuanced details that make the overall member experience significantly better. We have to get it right and I think real engagement on both sides is really key for that.

Deepash Amin: My key takeaway is that, whatever we decide to do we should put the members at the forefront of all of this. As we have already discussed, each individual is different – we need to consider a wide range of people and how best to interact with them.

Communication covers a lot of what we have discussed – that it is not just about the quality of the communication; it is about the communication journey. During the buy in, it is about having the right communication journey for those members. Whoever the insurer is, they need to understand that insurer and what they are going to get at the end of the buy-in and when they to move to buyout. It is this that will give them comfort that they are going to get the same or better service once they have moved away from their existing scheme, from one family to what is a new family, and that they are going to be taken care of.

This roundtable was held on 21 November 2024 in association with Pension Insurance Corporation