The new pensions freedoms have left many trustees grappling to ensure members get the right communications. Sara Benwell examines the guidance provided by the Pensions Regulator
One month is not a long time to get ready for some of the biggest changes the pensions industry has seen in a lifetime. But that’s precisely how long trustees had between the publication of the Regulator’s draft guide to communications and the new freedoms coming into force on April 6th.
Furthermore, conflict between the Financial Condust Authority and the Pensions Regulator, with the two bodies seemingly publishing conflicting advice, has left many in the industry baffled.
The guide itself provides information on changes to the disclosure regulations on retirement communications, and good practice suggestions for communicating with members about their retirement choices.
In practice, it has been well received. In particular, the provision of actual wording which can be cut and paste has been praised by trustees who are short on time.
Making members aware of Pension Wise
The regulator’s guide tells trustees that they must automatically tell members about Pension Wise as part of the ‘wake up packs’ sent four months before they reach their retirement date.
It also advises that trustees must make members aware of Pension Wise if:
- they are over or within four months of normal minimum pension age (currently 55)
- they meet the ill-health condition and ask for information about taking flexible benefits or are contacted about flexible benefits by trustees.
Trustees do not have to mention Pension Wise when sending out annual benefit statements or if a member requests the information but it has already been provided in the last twelve months.
To signpost to Pension Wise, trustees can either use the standard letter developed by the Government (available at: www.pensionwise.gov.uk/signposting/assets.zip), as well as a separate statement that the member should consider independent advice, or develop customised communications.
If a trustee is creating their own bespoke statement the regulator advises that it must include the following elements:
- a statement that pensions guidance is available to help members understand the options in relation to what they can do with their flexible benefits
- a statement that the pensions guidance may be accessed on the internet, by phone, or face-to-face
- the phone number and website address at which Pension Wise can be accessed and details of how the member can access the guidance face-to-face
- a statement that the pensions guidance is free and impartial
- a statement that the member should access the pensions guidance and consider taking independent advice to help them decide which option is most suitable for them.
If trustees are speaking to members about the flexibilities and accessing benefits, the regulator advises that trustees may need to provide additional statements that:
- the member may request further information about the flexible benefits, the member’s opportunity to transfer those benefits and the options available to the member under the scheme rules
- this information may help the member to decide what to do with the flexible benefits.
This guidance goes some way to helping trustees understand what the need to do to comply with the new regulations. However contradictary regulations published by the FCA have left many in the industry confused.
Not only were both regulators late to the party on freedom and choice, but what they are saying is opposed, says The People’s Pension’s Darren Philp. Whilst the FCA is saying providers must give risk warnings and ask detailed questions of members as part of the second line of defence, TPR is advising pension schemes to give limited assistance on the grounds that these measures could be construed as guidance.
Providers of personal pensions and members of investment governance committees would do well to ensure that they also meet the more stringent requirements provided by the FCA.