Ripples from across the pond
Your phone rings. It’s an unfamiliar number, but you pick it up anyway.
The recorded message begins: “Have you been mis-sold PPI…?”
You hang up immediately, annoyed that you’ve wasted even a second of your time.
Who can be bothered with yet another of these nuisance calls, urging you to claim compensation from your bank for mis-selling you a Payment Protection Insurance policy? PPI has practically become a by-word for spam calls and texts.
Yet not everyone has hung up – far from it.
Since 2011, the banks have been forced to pay out a whopping £24.4 billion to consumers, according to the Financial Conduct Authority – and they’ve had to set aside £13 billion more, part of which will go to settling more claims.
After all the publicity it seems somewhat fantastical that there are still people out there who can claim but haven’t yet.
But then, the PPI industry is working hard to convince everyone who is eligible to claim to do so – even if they were quite happy to pay for PPI when they bought it, and even if they really don’t care now.
You see, over the pond in America, something similar is happening with pensions.
Avoid those costly payouts
Did you know...
Over the last decade, companies have been forced to pay out nearly $400 million to employees who have sued them for charging oversize fees for their retirement plans, and for not fulfilling their fiduciary duties.
According to a recent article in the Financial Times, not only have the settlements resulted in financial payouts, the courts have also forced companies to more closely monitor the way their funds are designed and overseen. They have mandated regular reviews of service providers and fund options, so employees are less likely to get stuck with expensive, under-performing funds.
This enormous wave of litigation did not, of course, happen on its own. It was pioneered and pushed by one firm, Schlichter Bogard & Denton in St Louis. Without their efforts, it is reasonable to assume that most employees would not have realised that their 401Ks were being neglected and that they could sue.
A word of caution
It is too early for this to happen in the UK – auto-enrolment is still relatively new. But that doesn’t mean you can relax. What happens in the States inevitably makes its way here, and eventually some pioneering law firm will see the possibilities for a class action. And your employees could jump on board, even if they are perfectly happy with their pensions right now.
That means that one day, possibly not too far away, your company may be legally liable if you have not properly administered your employees’ pension funds.
It’s important that your governance is impeccable, because you have a duty to your employees to run their pension schemes carefully and responsibly. But now, it’s important for an additional reason – to protect your company from the massive, expensive lawsuits that may well be hurtling towards these shores.
Topics: Pension Governance