The February 2013 issue of Pensions update set out in some detail the DWP's proposals for amendments to the disclosure regulations. The consultation document indicated that the changes would come into effect in October 2013. The DWP has now announced, in its response to the consultation, that the changes will be postponed until 6 April 2014, to give schemes more time to comply, even though many of the changes are optional.
As responses were very mixed on the question of whether a more principles-based approach to disclosure should be adopted, it has been decided that the detailed requirements will remain in regulations. Although the revised draft regulations are not yet available, a few changes have been announced in the light of responses to the consultation. Some of the key ones are as follows.
Electronic communications: the regulations have been amended to clarify the original policy intention, which includes the freedom for schemes to give information by post, electronically, via an employer or by hand; but where electronic methods are used the rules set out in the regulations, which provide safeguards for members, must be followed.
Statutory money purchase illustrations: (SMPIs) although the consultation made it clear that schemes would be able to offer members a choice of assumptions, some respondents thought they would be required to do this. The consultation response confirms that this change is permissive, not mandatory.
The consultation asked whether the requirement to issue the first SMPI within 12 months should be changed in the light of automatic enrolment. A change has now been made so that schemes can choose the 12-month period or a longer period linked to the member's opt-out period.
Lifestyling: as proposed in the consultation, all DC schemes which use lifestyling will have to notify members and prospective members, as part of the basic scheme information, that a lifestyling strategy will be applied to their accrued rights. However, there has been a change to the time when they must notify members again: instead of notifying them between four months and two years before lifestyling is be adopted in relation to their funds, schemes will instead have to do this between five and 15 years before a member's retirement.
New regulations not more prescriptive: minor amendments have been made to ensure that the regulations reflect the policy intention of continuing to allow schemes to use a variety of methods to communicate with their members, including electronic methods.
Guidance: the DWP will continue to explore whether additional guidance would be beneficial in any areas, to support the guidance issued by the Pensions Regulator and the Financial Conduct Authority.
Further reading
Pensions update, February 2013
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