Changes to the Disclosure of Information Regulations

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The Department for Work and Pensions ("DWP") has been consulting on the draft of The Occupational and Personal Pensions (Disclosure of Information) Regulations 2013 ("the Disclosure Regs"). DWP has now published its response to the consultation, and its final proposals.

The Disclosure Regs specify information that must be provided by pension schemes, to whom it must be provided, and when. The aim is to ensure members and others are given a consistent level of information, and schemes have the certainty of knowing what information they should provide and when.

Disclosure regulations have been in force since 1987, and have been amended regularly since. Currently there are separate regulations for occupational schemes, personal pension schemes and stakeholder schemes. The new regulations will replace and consolidate the existing regulations that apply to occupational and personal pension schemes. They are expected to come into force on 6 April 2014. The disclosure requirements for stakeholder schemes will remain within the stakeholder schemes regulations, but will be amended to be the same as for occupational and personal pension schemes.

There are many detailed amendments, which align the requirements for the different types of scheme. Many of them are permissive, so as to reduce the need for immediate action. Most of the significant changes apply to defined contribution ("DC") schemes, but one applies across the board. Regulations made in 2010 allowed electronic delivery of information, either by email or via a website.

Those regulations did not cover all of the disclosure requirements, and some commentators felt the position relating to members who did not respond to requests for an email address was not clear. The new regulations allow for any information which must be disclosed to be provided electronically, although members can choose to have it sent by other means. The regulations clarify the rules to be followed if electronic communication is used.

There are two major changes affecting some or all DC schemes, plus some revision of the requirements for Statutory Money Purchase Illustrations ("SMPIs"). The first major change is to eliminate some of the duplication between DWP regulations and the requirements of the Financial Conduct Authority ("FCA") formerly the Financial Services Authority. Because personal pensions are a regulated product, the FCA requires information to be provided as part of the process of marketing and selling them. Generally where the DWP regulations required the same information to be provided, that requirement has been removed from the regulations.

The second major change requires DC schemes that operate any form of lifestyling to provide details as part of the initial scheme information, and again between 5 and 15 years before any changes to the investments begin. The intention is to allow members an opportunity to consider when they will actually retire, rather than have lifestyling changes based on an assumed retirement date.

Schemes will be allowed more flexibility in deciding the assumptions to be used when preparing SMPIs. To give one example, at present projected pensions must assume an annuity that increases in payment, with a contingent pension payable on death. Research has shown that the majority of relevant annuities are purchased on a single life, level payment basis. Schemes can choose a basis that is believed to be appropriate for the average membership of the scheme, members must be advised if the annuity assumptions have changed since the previous statement.

The finalised regulations are expected to be laid shortly and as mentioned above, they will cone into force on 6 April 2014. If you need help assessing how the changes will affect you please speak to your usual contact, or any member of the team.