In previous blog posts we have discussed some of the changes announced by the Chancellor in the 2014 Budget. Some of those changes take effect immediately, although many will not become effective until later in 2014 or 2015. In the meantime, pension schemes should not lose sight of other changes which are coming into force. One of the key current issues is the introduction of a new disclosure regime for pension schemes.
The requirement for information to be provided to members of pension schemes has been the subject of ongoing debate. Members need to have information so they can understand their rights and exercise them. However, there has been discussion over whether the statutory disclosure regime (previously contained in separate regulations for occupational and personal pension schemes) was too onerous for trustees and managers.
The existing disclosure regimes are now consolidated into the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 which came into force in April 2014. The Government explained in its consultation that the aim was to “consolidate, simplify, update and where possible harmonise the requirements”. Plans to adopt a “principles-based” approach were not pursued so what remains are regulations which, whilst arguably clearer and easier to apply, still leave trustees and managers with specific disclosure obligations and potential penalties of up to £50,000 if they do not comply.
- There is still a requirement for occupational pension schemes to give certain basic information to all new and prospective members although some of the information to be provided has changed or must now only be provided if a member requests it.
- Where a Defined Contribution (DC) scheme offers a lifestyling investment strategy option, information about this must be provided when a member joins and in the period five to 15 years before the member’s retirement date. This is a new requirement and places a further administrative burden on DC schemes.
- There has been a slight relaxation on the period within which a member should be informed of material changes to basic scheme information. This must now be done “before or as soon as possible after (and in any event within three months after) the change”.
- The information that must be provided to DC members in a Statutory Money Purchase Illustration can now be more personalised. For example, rights to lump sum payments can be set out separately. This is something that is likely to become much more relevant to members following recent changes announced in the 2014 budget.
An update of the information occupational and personal pension schemes must provide to members is to be welcomed and overall there are no great changes in the approach that must be taken.
However, trustees should be aware of the new obligations and ensure that their systems are adapted to comply with these because there could be serious consequences – both in terms of member dissatisfaction and regulatory action – if they do not.
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