Pension schemes and disclosure of information

29 November 2010

Government proposes further reforms
Earlier this year, the Department for Work and Pensions (“DWP”) undertook a public consultation exercise over its proposals to introduce amending regulations which would simplify some of the disclosure of information requirements applying to pension schemes. The DWP also consulted on the use of e-mails, websites and similar communications by these schemes. In November 2010, the DWP published its response to the consultation exercise. As a result of the comments received, a number of changes have been made in drafting the Occupational, Personal and Stakeholder Pension Schemes (Disclosure of Information) (Amendment) Regulations 2010 (“Regulations”) which are currently being considered in Parliament. The Regulations are due to come into force on 1 December 2010.

Electronic communications (“e-communications”) with members
These Regulations make amendments to the circumstances in which information is disclosed by trustees or administrators to members of schemes and vice versa. The amendments relate to most occupational, personal and stakeholder pension schemes. Existing legislation is amended to allow certain information to be disclosed by electronic means, in particular by e-mail and websites.

Will schemes have to use e-communications?
Before a scheme can make relevant information that has to be compulsorily disclosed to members available via a website for the first time, it must write to the members electronic or postal address advising them the information will be placed on a website. This notification must include the web address and details of how to access the relevant information (which in the case of personal information might include login and initial password details). Relevant information means any information, declaration, notice, notification or statement which these Regulations require the trustees or manager of a scheme to give or furnish to a member or beneficiary of the scheme.

These amendments do not prevent information from being disclosed by post because e-communications can only be used if the specified conditions in the Regulations are met. Also, the Regulations require schemes to accept notifications or information requests from members by post even if the scheme introduces an e-communications procedure. This leaves schemes free to accept e-communications from members if they wish, in which case it would be for the scheme to decide which e-communication methods a member could use.

Will the Regulations provide flexibility for schemes to achieve shorter, clearer and more concise annual benefit statements (“ABS”) in defined contribution arrangements?

The DWP reports that the majority of respondents agreed with the proposals to reform the formatting and content of information in ABS. Comments were received that the Regulations were pragmatic and would give schemes flexibility to provide more concise statements; giving members the opportunity to access more detailed information if they choose to do so. However, due to the costs of making changes, a number of schemes may await a suitable time to amend the manner in which they send and format ABS statements. The information no longer required includes:

• “…a statement that the illustration should not be regarded as the only consideration by reference to which the member should make decisions as to his personal arrangements;
• a statement to the effect that the provision of certain information is required by law; and
• a statement to the effect that the information has been prepared by reference to certain assumptions set out in the relevant guidance."

Click here to view the regulations online >>