The modern challenges facing pension schemes
Strengthening pensions schemes
In the complex world of pension schemes, the challenges of managing data, preventing fraud, and meeting regulatory demands have never been more prominent.
As a leading provider of data and fraud prevention solutions, we understand the unique obstacles that pension schemes face. Below are some of the critical issues the sector is currently grappling with, alongside insights into how data-driven solutions can help mitigate risks and enhance operational efficiency.
Data and the digital dilemma: An ongoing challenge
Data remains at the heart of every pension scheme's operation, and managing it effectively is critical for success. The “digital dilemma” - the challenge of securing, maintaining, and updating vast amounts of data - continues to be a pressing issue. Despite technological advancements, pension schemes are still battling outdated data, missing members, and inaccurate records.
This digital dilemma has far-reaching consequences: from complicating member engagement to making pension fraud easier to execute. Addressing these challenges requires a data-driven approach that combines regular member checks with the ability to securely access data in near real-time.
LexisNexis® Risk Solutions is equipped to provide just that. With our Smartcleanse® platform, pension schemes can ensure they are working with more accurate member data, reducing the risk of error and improving operational efficiency.
The current talking points in pensions...
A matter of precision and care
Managing member mortality is one of the most critical responsibilities of pension schemes. Failing to keep track of mortality can result in overpayments, which may need to be recalled from beneficiaries - a process that introduces unnecessary friction during an already emotionally charged time. Such situations not only reflect poor member engagement but can also damage the trust between pension providers and members.
Regular mortality screenings, when paired with address checks, can provide pension schemes with an up-to-date view of their members, ensuring appropriate communication and avoiding sensitive errors such as sending correspondence to the wrong address. LexisNexis® Smartcleanse®, along with our Mortality Check and Existence Check models, helps pension schemes proactively manage these issues.
Our partnership with Brightwell is a prime example, where rapid electronic checks against our extensive data sources, including restricted death registries, significantly reduced overpayment periods. By identifying member deaths early, Brightwell was able to decrease its average overpayment period to just 40 days - a substantial improvement that minimised disruption for beneficiaries during difficult times.
Helping BTPS reduce pension overpayments and increase member satisfaction
One of the UK’s largest pension schemes achieves a paradigm shift in reducing overpayments and increasing member/beneficiary satisfaction, with the support of LexisNexis® Risk Solutions.
A vital tool for pension schemes
Effective member tracing remains a crucial component in reducing pension scheme liabilities and ensuring the right people receive their entitlements. Whether it’s tracking down deferred members or ensuring current members' details are up to date, tracing is an ongoing challenge that requires robust data and sophisticated tools.
Our solutions, including the tracing of goneaways, are designed to locate members swiftly and confidently. By using comprehensive data sources, pension schemes can quickly identify when a member has moved, or updated their contact details, reducing the administrative burden and enhancing the member experience.
Additionally, tracing plays a critical role in the repatriation of assets to beneficiaries after bereavement. Ensuring that pension benefits reach the rightful beneficiaries without delay is essential to avoiding legal complications and providing a smoother experience during emotionally difficult times. By swiftly identifying and verifying next of kin, pension schemes can manage the sensitive process of distributing funds with accuracy and compassion.
Pensions: The Digital Dilemma
The rising threat of account takeover
The threat of fraud in the pensions industry is escalating, with account takeovers being one of the most significant risks facing schemes today. As fraudsters become more sophisticated, traditional defences are proving inadequate. Account takeover fraud involves cybercriminals gaining control over members’ pension accounts, leading to unauthorised withdrawals, financial loss, and reputational damage for providers.
A data-driven, multi-layered approach is essential to combating this threat. Lessons from sectors like banking, insurance, and gaming - which continue to undergo significant digital transformations - show how fraud risks can intensify as industries increasingly move online. The pensions sector is likely to face similar vulnerabilities as it digitalises further. Understanding the tactics fraudsters have used in other industries serves as a warning for pension schemes to bolster their defences now, before they become prime targets.
As pension schemes move toward digitalisation, members may become alarmed if they log in and find not all their pensions visible, fearing they’ve been stolen. This creates an opportunity for fraudsters, who will rush in with scams, offering to help consolidate pensions, only to gain access and perform account takeovers, siphoning off funds. Additionally, some fraudsters may infiltrate accounts and quietly add themselves as beneficiaries, setting up long-term fraud.
To prevent such attacks, pension schemes can leverage the potential of LexID®. It not only consolidates identities but also ensures they are verified, providing a comprehensive view by linking all possible emails, addresses, and names associated with an individual, ensuring that none are fraudulent. This added layer of protection helps secure member accounts against sophisticated fraud tactics.
Digital Pensions Fraud Report
Is the pensions sector burying its head in the sand? This report warns that the pensions sector's current identity verification standards are too basic to stop sophisticated fraud attacks, in the run up to digitalisation.
Local Government Pension Schemes:
Preparing for the future
As Local Government Pension Schemes (LGPS) face a crucial deadline, with all schemes required to meet new regulatory standards by 31st October 2025, the pressure is on to ensure data readiness. LexisNexis® Risk Solutions offers a comprehensive suite of data services to support LGPS in this transition.
Our solutions, including verified contact data and the advanced identity management capabilities of LexID®, ensure that pension schemes can monitor and maintain accurate member records.
By leveraging our accreditation with the LGPS, schemes can confidently navigate this period of change, ensuring compliance while reducing risks such as pension fraud and inaccurate payouts. With the ability to provide a single view of member data across multiple sources, we empower pension providers to meet regulatory requirements and improve operational efficiency.
LexisNexis® Risk Solutions approved provider for LGPS framework
Supporting Local Government Pension Schemes with data accuracy, fraud prevention, compliance, and informed decision-making.
The latest on Consumer Duty:
Driving change in the industry
The Financial Conduct Authority’s (FCA) Consumer Duty guidelines have introduced a new layer of responsibility for pension providers, requiring them to prioritise the best interests of their members. As the Pensions Dashboard becomes regulated under the FCA, Consumer Duty will also apply, pushing schemes to take a more proactive approach to member engagement, risk management, and data accuracy.
Additionally, the consolidation of small pension pots remains a key challenge, particularly around member consent. Consumer Duty may offer a path forward by allowing schemes to consolidate where it is demonstrably in the member’s best interest, even without explicit consent. This highlights the importance of ongoing data monitoring, ensuring that schemes can operate efficiently while delivering greater value to savers.
LexisNexis® Risk Solutions can support pension schemes in delivering a compliant and efficient Pensions Dashboard, offering clarification on required data formats and ensuring that data is verified and clean. Beyond compliance, we help pension providers deliver better outcomes for their members by offering accurate, consolidated views of member data.
Just Group halves redemption delays, giving families peace of mind
LexisNexis® Risk Solutions helps Just Group to more than halve the time taken to obtain confirmation of death, enabling faster redemption processes with minimal intrusion on the family of the deceased.
"LexisNexis Risk Solutions is the perfect partner for what we need. They are definitely helping us provide great customer service. Without them, we'd have to approach this in a completely different way, which just wouldn't be cost effective."
What Just Group has to say about LexisNexis Risk Solutions
Ensuring operational efficiency in pensions
There is growing concern that UK pensions may not deliver sufficient value for money for members, pushing pension providers to find ways to reduce operational costs while maximising returns.
Many are turning to long-term growth assets and consolidation into super funds to achieve this. Emerging models like Collective Defined Contribution (CDC) investments, which have seen success in countries such as the Netherlands, Australia, and Canada, present additional avenues for sustainable growth. Additionally, pension companies are exploring innovative solutions like sidecar savings accounts to keep pensions appealing to younger generations.
LexisNexis® Risk Solutions plays a critical role in supporting these shifts by providing tools that enhance operational efficiency, data accuracy, and regulatory compliance. Our solutions, such as enhanced Companies House checks on directors, along with PEPs, sanctions, and adverse media screening through solutions like LexisNexis® Bridger Insight® XG and LexisNexis® WorldCompliance™ Data, offer crucial safeguards. These tools are especially valuable for pension schemes diversifying into riskier alternative investments, ensuring they maintain compliance and mitigate potential risks.
The challenges facing the pension sector are multifaceted, but with the right tools and strategies, they are surmountable. From managing mortality data to preventing fraud, ensuring compliance with Consumer Duty, and tracing lost members, pension schemes can enhance their operations, reduce risk, and deliver better outcomes for their members. At LexisNexis® Risk Solutions, we are committed to supporting the industry with innovative, data-driven solutions that address these pressing concerns.
