The Government has proposed a series of simplifications to pensions disclosure rules as policymakers consider moving towards a more “principles-based” regime.
The Department for Work and Pensions published a consultation last week detailing plans to remove duplications in disclosure requirements affecting occupational, personal and stakeholder schemes and harmonise the different sets of rules where possible.
In particular, officials have moved to iron out any repetition and “discrepancies” between FSA and DWP rules.
The DWP says it considered consolidating all pension disclosure requirements into one set of regulations but decided against this proposal after receiving a “mixed response” from the industry.
It says: “The disclosure regulations were introduced some 25 years ago and have been significantly amended over this time to take account of evolving policy changes.
“This has led to the situation they are in today where there are many duplications, discrepancies and gaps between the occupational and personal pension requirements.
“Scheme trustees, administrators and managers may currently need to send different information at different times, depending on the type of scheme the member belongs to, which means that keeping track of the information disclosed can be onerous.”
The DWP has proposed simplifying the terminology used in existing regulations and removing requirements for personal pension schemes to provide basic scheme information where these duplicate FSA conduct of business rules.
The DWP also wants to create a new requirement for personal pension schemes and defined-contribution schemes to inform members if their funds are being invested on a “lifestyling” basis.
In addition, it has proposed scrapping the requirement for pension schemes to assume a member will take an annually increasing annuity when producing illustrations. The DWP says this will allow schemes to provide projections which relate to the choices a member actually makes at the point of retirement.
Finally, the DWP wants to update disclosure requirements to clarify how websites and email can be used to provide information to members. For example, the DWP says where the regulations specify how information should be sent, such as “by post” or “in writing”, this should include email.
The Government plans to introduce these simplified disclosure standards in October this year.
Policymakers are also considering moving to a more “principles-based” approach to pensions disclosure. Any such change would be consulted on separately.
If this happened, strict rules around how pension schemes provide information to members could be scrapped and replaced with a single high level principle.
The DWP suggests this principle could be that “members should be given sufficient information that allows them to understand the benefits to which they will be entitled and any other relevant information that will enable each member to make decisions in his or her best interests”.