Out-Law News 2 min. read
23 Dec 2015, 9:51 am
The recommendation is one of seven 'good practices' for member communications, developed by the European Insurance and Occupational Pensions Authority (EIOPA) following a review of existing practices in the various EU member states. It is consulting on its proposals until 22 March 2016, although the final document would not be legally binding or subject to the 'comply or explain' principle.
During its research, the regulator found that paper-based communication continued to dominate scheme interaction with members. However, it found there was a "gradual shift" towards schemes offering email and online platform-based communications as additional options, which it said was potentially a result of "changing preferences of scheme members, [for example] the younger generation being more internet-savvy".
"Against this background, EIOPA does not wish to promote one specific communication tool or channel at the expense of other possibilities," the regulator said.
"In fact, EIOPA came to the conclusion that a multi-channel communication strategy which combines several different communication tools and channels seems to be an effective way to reach different types of scheme members with different habits and preferences. For example, younger scheme members may refer to the website of the scheme as a primary source of information and, in case of questions, seek answers via email or online chat, while older scheme members and beneficiaries may prefer to seek contact over the telephone," it said.
Keeping member telephone numbers and email addresses, along with their physical addresses, would also minimise the risk of losing contact with scheme members "should they move without leaving an address", EIOPA said.
EIOPA has also recommended that schemes develop a single, "coherent" strategy for communicating with members, make use of online platforms to store member information as well as other HR-related information; provide interactive pension 'calculators' to help members plan for their retirement; use tracking tools to keep members updated with changes to the scheme as they occur; and regularly assess members' understanding of their communications.
The practices recommended by the regulator are based on improving member engagement and cost effectiveness, and on making information accessible to the widest variety of scheme members. However, EIOPA said that they may not be applicable in all member states or to every scheme, "for example due to the nature of the individual legal framework or the costs and benefits".
"The Good Practice observations in this report should be regarded as principles-based, with member states and market participants encouraged to apply them to the extent that they benefit their individual circumstances and that they fit with the pension system," EIOPA said.
Pensions expert Alastair Meeks of Pinsent Masons, the law firm behind Out-Law.com, said that EIOPA's consultation reflected similar work underway in the UK.
"Poor communication is a real source of risk for employers and trustees," he said.
"Getting communications wrong is one of the prime causes of complaints against schemes. Communications are under scrutiny at present in the UK anyway – EIOPA's consultation will add to this live debate," he said.
UK regulator the Financial Conduct Authority (FCA) published a discussion paper earlier this year on the ways in which financial services firms could improve their consumer communications. It has said that it wants these businesses to move away from communications filled with "technical" language and instead find "innovative" ways to reach customers and improve engagement, such as through the use of infographics, interactive apps and videos.
EIOPA found "a serious problem of awareness and engagement" among UK pension savers as part of the research that informed its consultation paper, it said. UK employees "have generally a low engagement level with their pension and do not know much more than the specific amount taken from their wages", it said in the paper.