Pensions Bill reaches Third Reading in the House of Lords
This week, as the Pensions Bill reached Third Reading in the House of Lords, the Government has effectively rewritten the new Clause it introduced only a few weeks ago regarding the disclosure of information regarding transaction costs (see Pensions Bulletin 2014/08).
The latest amendments extend the scope of the regulations that the Government must make so that they are now to cover administration charges as well as transaction costs. The regulations may also require other information relevant to administration charges and transaction costs to be published if this would or may assist comparisons between schemes.
The above regulations will now be restricted in scope to money purchase occupational pension schemes. But the Pensions Bill now amends the Financial Services and Markets Act 2000 so that the Financial Conduct Authority must make general rules covering similar ground to the above in relation to personal pension schemes, including those that are work-based.
During the debate on Wednesday, Lord Freud said requiring a similar disclosure for defined benefits schemes “merits further examination and consultation with a range of interested parties” and that it may be that such a measure “would enable trustees of defined benefit schemes to better discharge their fiduciary duties”.
The Government will formally consult before making the regulations regarding money purchase schemes and as part of this it seems that it will examine the possibility of extending the disclosure to defined benefit schemes.
It also seems from the debate that, in relation to money purchase schemes at least, the intention is that the disclosure will be on a general basis; not just to scheme members, and that all the costs are intended to be disclosed, appropriately itemised.
Disclosure changes imminent – a chance to reduce communication costs?
It is often said that “a journey of a thousand miles begins with a single step” and it certainly feels like the implementation of the new consolidated disclosure regulations has been a lengthy journey. However, the end is in sight as the new regulations will come into force next month on 6 April 2014. Trustees, managers and administrators should have reviewed their communication procedures to check they are compliant with the new regulations and also to see whether they can take advantage of the new flexibility and easements to reduce the costs of communication exercises.
We have previously reported the detail of the new disclosure regulations (see Pensions Bulletin 2013/32 and Pensions Bulletin 2013/08) and noted the following key points:
- Electronic communications such as e-mail and websites can be more readily used to provide information to scheme members, subject to safeguards
- There is more flexibility for schemes to tailor Statutory Money Purchase Illustrations (SMPIs) for members, for instance as regards annuity increases and spouse’s pension
- The introduction of a requirement to provide information about any “lifestyling” investment strategy being used, both when members join a scheme and also between 5 and 15 years before retirement
Comment
The new disclosure regulations are intended to be easier to understand and overall, provide more flexibility for how scheme trustees and managers provide information to members.
ABI sets out standard for annuity market
The Association of British Insurers (ABI) continues with its reforms of the insurance industry’s offering on retirement incomes with a new minimum standard which the ABI’s members must put in place over the next 18 months. By summer 2015, consumers approaching retirement can expect to:
- Discuss their retirement options with their pension provider (or an impartial advice or guidance service) including a high level overview of alternatives to annuities
- Receive a comparison of annuity quotes offered by all ABI pension providers (or be introduced to an intermediary who provides the service) early in the retirement process
- Be considered for enhanced annuity rates by providing medical information
This latest move comes after the ABI’s compulsory Code of Conduct on Retirement Choices (see Pensions Bulletin 2013/09) and provision of specimen annuity rates (see Pensions Bulletin 2013/36) and is in response to the Financial Conduct Authority’s review in February (see Pensions Bulletin 2014/07).
Comment
These changes seem to be reiterating requirements already set out in the Code of Conduct, only even more prescriptive. Nonetheless, for consumers it represents another step towards the right direction to help make the right retirement decision.
Minor changes to pension law enacted
Following two separate consultations last year (see Pensions Bulletin 2013/09 and Pensions Bulletin 2013/50), regulations have been laid before Parliament that:
- Remove a restriction on the appointment of auditors for trust-based occupational pension schemes which have at least 500 participating employers, because the nature of the restriction is such that the scheme may not be able to find any auditor that can do the job
- Reinstate the ability for trustees to obtain a discharge of their liability to provide pension benefits when those benefits have been bought out and the policy contains the ability to take a pension commencement lump sum
- Amend the Transfer of Employment (Pension Protection) Regulations 2005 to ensure that new employers following a business transfer are not required to make higher contributions than an employer might have to pay under the auto-enrolment legislation
- Correct a cross referencing error in the employer debt regulations
The Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2014 (SI 2014/540) come into force on 6 April 2014.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
