Pension reforms: the opportunities and pitfalls

New pensions rules coming in April will allow hundreds of thousands of pensioners to access huge lump sums of cash. This will create new selling opportunities for brands but marketers must remember the lessons learnt from PPI and accident claims.

In April 2015, pension rules will change. People aged 55 and over who have saved for a pension will be able to access it and spend large cash sums as they wish.

The DMA is worried that this new money could also pose a threat to the reputation of the industry as rogue operators flout the law and try to cash in on this newly minted market.

Any effective campaign strategy must be based on the principles outlined in the DMA Code – all of which centre marketing on putting the customer first. Backed by a series of channel-specific how-to guides, the DMA Code sets out the rules and industry standards of best practice that marketers should take into account when planning and executing their campaigns.

New opportunities for brands

Savers have always had the freedom to withdraw up to 25% of their pension pot in a tax-free lump sum. But under the new system savers will be able to access as much of their pot as they wish – subject to their marginal rate of income tax in that year (25% will remain tax free). Ultimately, the reforms will soon hand people unprecedented flexibility over how they access and use their pension.

According to research conducted by actuary firm Hymans Robertson £6 billion in cash will be released from pension funds in the first four months after the rules are relaxed in April. Nationwide, two million people – 50% of over-55s – say they will take advantage of the new rules.

In a recent Channel 4 Dispatches documentary, Alan Higham, retirement director at Fidelity Worldwide Investments, said:

“About 20% of the callers we’ve had are from people who have made very quick plans to spend money on house improvements, buy a new car, go on holiday… and are looking to access their pension funds quickly for that purpose.”

This will create new opportunities for brands. High-end luxury items and financial services providers will expect to do well. As a side-effect, the new money in the system will attract the one-to-one marketing industry as brands reach out to these consumers.

Preventing pensions from becoming the new PPI and accident claims

As the recent examples of accident claims and banks mis-selling PPI shows, the short-term gains to be had from reaching out to people have been so lucrative many rogue companies have been prepared to ignore marketing laws and best practice – particularly through making nuisance calls. The legitimate marketing industry in turn has suffered reputational damage, increased media and political scrutiny and a loss of consumer trust through being tarnished by such practices.

The DMA has provided its members with helpful information they can share with their customers and prospects to inform them about how to make a complaint about unwanted marketing contact, as well as advice on how to recognise a scam and who to report it to.

As the recent examples of PPI and accident claims have shown, it’s down to the legitimate industry to take the lead in earning consumer trust and countering the reputational damage caused by rogue operators prepared to flout the law.

Click here for the Don’t let pensions marketing become the new PPI guide