This is the second article in a series exploring member experience in pension buy ins and buy outs. The first considered the practical challenges trustees face on the journey to buy out. Here, we look at what happens next — in particular, how member experience is protected once responsibility passes from trustees to insurers.
Service issues such as quotation turnaround times, call centre responsiveness and complaints handling can have a real impact on members. Many members have only a limited understanding of the additional financial security provided by the insurance regime and tend to judge providers primarily through their day‑to‑day interactions.
While all trustees should consider member experience, their ability to prioritise it varies. Schemes that can only just afford a buy‑in are understandably price focused. Better‑funded schemes may place greater value on service quality and member outcomes when selecting an insurer.
At buy‑out, members move from the trust‑based pensions regime into the insurance regulatory framework. If problems arise post buy‑out, trustees are no longer there to intervene. The key source of comfort, therefore, lies in the strength of insurance regulation — particularly the Consumer Duty regime.
Introduced in 2023, Consumer Duty marked a shift from the Treating Customers Fairly framework to a more demanding requirement for firms to deliver good outcomes. Insurers must now test, evidence and, where necessary, improve the outcomes their customers receive.
In practice, this gives regulators powerful tools. For example:
Importantly the FCA has powers to investigate and enforce the principles of Consumer Duty – which it can do either off its own bat or in response to complaints from consumers. In addition, the Financial Ombudsman Service can provide individual members with compensation if insurers do not live up to the required standards.
At first blush, the Consumer Duty regime should offer trustees considerable comfort that members will receive a reasonable standard of service after buy‑out. Insurers have invested heavily in service delivery and outcome monitoring in response to the regime.
However, the duty is principles‑based, not prescriptive. Interpretation can vary, regulatory expectations are still evolving. At the same time, there is a renewed political focus on growth and productivity – as evidenced in the DB surplus reforms. Too much focus on consumer protections may be at odds with this new political agenda. So, whilst it is unlikely that the Consumer Duty regime will be repealed, insurers could interpret its principles through a more “light touch” lens, leading to more variability in member experience
Due diligence at insurer selection remains essential but only provides comfort at a single point in time. It cannot guarantee service standards decades into the future.
In the next article, we will explore what more trustees and insurers can do to secure long‑term member experience, including: contractual protections in Individual Policies, publicly available common reporting metrics and independent governance models.
Read the first article in this series: How can we safeguard good member experience long after a buy-out? authored by LawDeb's Lynne Rawcliffe and LCPs Katie North-Walker and Myles Pink.
This is the latest article in a series from LawDeb, LCP and Hogan Lovells Cadwalader. This article was authored by Lynne Rawcliffe, Trustee Director and Head of the Endgame Solutions Working Group at LawDeb and Claire Southern, Corporate and Finance Partner at Hogan Lovells Cadwalader.