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Communication is key when it comes to pension flexibilities

Changes coming into effect in April 2015

The Pensions Regulator has published draft guidance for trustees, administrators and advisers of occupational pension schemes on communicating with members about pension flexibilities. 

This guidance has been prepared ahead of the legal changes coming into effect on 6 April 2015 which will provide many pension scheme members with increased flexibility as to how they can take their benefits from age 55 and provide more options for taking retirement income.

The guidance sets out the new disclosure of information obligations contained in the Occupational and Personal Pension Schemes (Disclosure of Information) (Amendment) Regulations 2015, which will come into effect on 6 April 2015.

Pension Wise

Trustees will now be required by law to communicate information to affected members about how to access Pension Wise, a free and impartial service introduced by the Government to help people understand their retirement choices. This information must be communicated to members:

  • At least four months before the member reaches their retirement date;
  • Over or within four months of normal minimum pension age (currently 55); and
  • To members who meet the ill-health condition.

This information must also be communicated to members who ask for information about their flexible benefits.

Additional communication requirements

Trustees are also required to provide additional information to affected members, including:

  • A statement of the options available under the scheme rules;
  • A statement informing the member they have the opportunity to transfer flexible benefits to one or more different pension providers; and
  • An estimate of the value of the member’s flexible benefits.

As general guidance, trustees do not need to send this information if it has been provided to the member within the last twelve months. The guidance sets out legal timeframes for providing the information, however, it encourages communication at the earliest opportunity.

Generic risk warnings

As good practice, trustees are also encouraged to provide generic risk warnings in respect of the four main retirement options, irrespective of whether they are offered in the scheme. These generic risk warnings should be provided at the point a member is required to make a final decision to take their retirement benefits.

At the same time, it is recommended that trustees ask the member to sign a statement confirming they have received Pension Wise guidance and have read the generic risk warnings. The guidance warns against the trustees providing any specific advice and if a member requires this, trustees should instead direct them to Pension Wise and/or an FCA-regulated financial adviser.

If you have any questions or would like more information, please contact one of our specialists below.

Author: Amanda Lea

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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