Retirement choices – helping trustees communicate pension flexibilities to members
Thursday 5 March 2015
A new draft essential guide is published today by The Pensions Regulator to help pension scheme trustees communicate with their members about the impact and possible risks of their DC retirement choices.
Changes in the law mean that, from 6 April, many members of UK DC pension schemes will have increased flexibility over how they take their pension benefits from age 55.
The draft essential guide provides information on key changes to the law on retirement communications for members of occupational schemes offering DC benefits, which the Government has proposed in draft changes in regulations.
To view the guide go to communicating about pension flexibilities.
The guide specifies that trustees must tell members how to access Pension Wise – the Government’s new free and impartial guidance service – as they approach retirement.
The guide also includes the regulator’s good practice recommendations for communicating with members about these changes. In addition, it includes some suggested wording on generic ‘risk warnings’ to help members make informed choices by alerting them to the benefits and risks of different options. It also recommends asking members to make a declaration to trustees that they have accessed Pension Wise or taken financial advice, and have read the generic risk warnings, before making their decision.
The regulator’s final guide will be published after the amended regulations come into force, expected to be 6 April.
The Pensions Regulator’s executive director for defined contribution and public service pension schemes, Andrew Warwick-Thompson, said:
“Members will soon have far more choice about what they do with their pension pot when they reach age 55. But with more options comes greater complexity and new risks associated with poor member choices. We appreciate the communication challenges that the changes pose for trustees.
“We are helping trustees by providing guidelines on the generic risk warnings we recommend that they provide to members so that they can make an informed choice about their options - annuity (or scheme pension if offered by the scheme), flexi-access drawdown, taking a number of cash sums at different stages, and taking the entire pot as cash in one go.
“It is important that the generic risks and possible tax implications associated with each choice are brought to members’ attention before any irreversible decisions are made.
“We also recommend that trustees continue to make use of the ‘scorpion’ campaign materials as part of their member communications, to help members identify and avoid scams which target their retirement benefits.”
Editor's notesThe Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the employer’s plans for sustainable growth (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
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