The Coronavirus pandemic has shown that many more people may be more vulnerable than they realise.

In this week’s double length insight article, we look at what workplace pension providers are doing to help identify and address the needs of their vulnerable customers.

By October 2020, the number of UK adults with characteristics of vulnerability increased to 27.7m, according to the Financial Conduct Authority’s Financial Lives Survey. This means that overall, around 53% UK adults are now considered as vulnerable in some form by the regulator.

In its guidance on the fair treatment of vulnerable customers, which came into effect in February 2021, the regulator said product providers and advice firms need to develop strategies which can recognise and appropriately service the needs of vulnerable customers.

The guidance now puts the onus on firms to have a deep understanding of how their customers experience products and services as they experience vulnerabilities due to health, life events, financial and emotional resilience, and personal capability.

Therefore, does this mean that Workplace pension providers can no longer get away with products designed for the ‘average’ customer?

The FCA will now expect pension providers to make changes to their product design, internal processes, and staff training to adapt their offering to a more tailored experience and customer service.

With the regulator committing to assessing the process firms have made in implementing the vulnerability guidance in 2023/24, the pressure is on for workplace pension providers to ensure they develop their vulnerable customer strategies.

According to the FCA guidance, what has been reported to work well is fostering a culture where staff are encouraged to understand and empathise with vulnerability, an emphasis on training, removing fear around holding difficult conversations, creating specialist teams, having a greater range of accessible options, and building handling vulnerable customers into staff performance assessments.

Our data shows that the majority of workplace pension providers are well under way in developing their vulnerable customer strategies. Only Aegon and Cushon did not share a vulnerable customers strategy with us (data as of September 2021 and due to be updated next month).

Fidelity handle vulnerable customers in a variety of ways including: a dedicated team for dealing with vulnerable customers, provision of large print, braille or audio content where needed, short-term third-party access codes, and client services training to deal specifically with vulnerable customers, covering identification, communication techniques, processes and client notes.

Legal & General offer specialized online support for vulnerable customers. They also prioritise important and critical processes which relate to customers who either need a regular income or to access to their pension when they need it. If a customer cannot get through to a member of staff immediately, the helpline message provides an email address for the customers, and if they use this they will receive a call back from a member of the team.

Royal London has a detailed view on vulnerability across its products, via both the Group Insight team and Conduct Risk team. This has helped them drive training for servicing teams for example, to allow them to recognise (and record) where a customer has a vulnerability that may affect dealings with them. There is also a dedicated Vulnerable Customer Manager to lead the firm’s approach.

Standard Life launched their Helping Hand initiative in 2017, to help with identifying and providing the right support for customers who are or who may be facing any number of personal challenges. They have in place extensive training to ensure staff all have an understanding of different vulnerabilities and how we they best support customers in potentially vulnerable situations.

(The data above was provided by each provider in September 2021)

 Some workplace pension providers also have agreements with third parties in order to ensure their vulnerable client policies are robust.

  • Hargreaves Lansdown has a partnership with Dementia UK to ensure that it can support vulnerable clients and train colleagues to ensure it is providing the best service for vulnerable clients.
  • Royal London has partnered with The Money Advice Trust to help develop their training approach.
  • Standard Life are working with the Samaritans to provide support to their members.

One of the biggest challenges faced by workplace pension providers and advisers dealing with vulnerable clients, is how to identify them in the first place.

Seven in ten over-45s have found themselves facing potential financial vulnerability but chose to keep it to themselves, rather than sharing with an adviser or provider, according to a recent report from retirement consultancy Just Group.

Of these, a third (30%) admitted their ability to absorb information and make decisions was affected by the circumstances which made them vulnerable.

Those aged between 45 and 54 were twice as likely to say they have experienced situations which could cause financial vulnerability (40%) than those aged over 75 (21%).

Of those who told key organisations they were faced with vulnerabilities only 16% alerted their financial adviser, 14% their employer and 11% their brand or credit card company.

But what can workplace pension providers do to ensure that they are routinely and sensitively asking about any influencing factors and circumstances that are impacting a scheme member’s level of vulnerability?

There are some tools and questioning frameworks that have been identified by the FCA in their consultation which are known by their acronyms: TEXAS, IDEA & CARERS.

The frameworks were developed by the Royal College of Psychiatrists and Money Advice Trust to assist staff in dealing with conversations around vulnerability.

The TEXAS framework can help frontline staff manage disclosures effectively, which is a key part of creating an organisation where customers are confident to disclose. The FCA recommends it is used as a training tool for managing initial conversations.

 The IDEA framework can be used by specialist staff to help structure and manage more in depth conversations, ask the right questions, and identify relevant information.

 The CARERS framework was developed to assist with handline disclosures from carers to ensure that helpful information is not lost due to staff concerns around data protection.

As part of our upcoming 2022 Financial Wellness ratings, we have produced a new set of questions designed to fully understand how workplace pension providers are identifying and addressing vulnerable customers.

Once we have this data back, we will be share some of the findings a future insight.