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Retirement risk warnings and guidance

Important

Early draft of the code of practice

This code is not in force yet. It is an early version for the new code of practice consultation.

To give us feedback on issues such as the design, usability and navigation of this code, email us at webfeedback@tpr.gov.uk.

You can also read more information about the consultation.

Published: 17 March 2021

Members with a DC or cash balance pension pot have a variety of options for taking retirement benefits. There are no restrictions on the amount they can withdraw as cash, though there may be potentially significant tax implications.

Depending on the scheme’s rules, a member may not be able to access their chosen flexible benefits directly from the scheme. They may need to transfer to another arrangement to gain access to the full range of options.

When providing members with information about retirement options for their DC or cash balance benefits, the law requires certain information on guidance and risk warnings to also be provided.

Governing bodies must:

  • in certain circumstances,RT1, RT2, RT3 provide a statement informing members about the free and impartial government guidance service
  • ensure the statement recommends the member accesses the government’s guidance service and that they consider taking independent advice
  • where contact is made by either the member or the governing body about what the member may do with their DC or cash balance benefits, provide the above statement about relevant guidance (and any additional statement where required). The statement(s) may be given verbally unless requested in writing.RT4
  • identify any circumstances where there is a requirement to provide the information to individuals other than the member (eg beneficiaries)

Governing bodies should:

  • make members aware of their right to transfer their benefits to another scheme at any age, to access their benefits in a variety of different ways
  • ensure all communications issued to members about their retirement options clearly set out what they need to consider to make an informed decision about their benefits. See also General principles for member communications.

Where scheme members with DC or cash balance benefits are approaching retirement, governing bodies must:

  • issue retirement information to members setting out the options available on accessing their retirement savings within the scheme. The information must include either:RT5
    • the Money Advice Service guide ‘Your pension: your choices’ (or any replacement that is prepared or approved by us)
    • a statement that gives materially the same information
  • provide certain ‘risk warnings’ to members when providing the member with an application form or another way to access their benefits (some exceptions apply).RT6 The risk warning statement must:
    • contain information about the options available to members in respect of their benefits and the risks associated with each;RT7 or
    • provide personalised risk warnings tailored to the member’s circumstances.
  • highlight in the risk warning statement the importance of reading the warnings and accessing pensions guidance or independent adviceRT8

Governing bodies should:

  • ensure that communications containing risk warnings clearly articulate the risks associated with each of the different options available to the member, and clearly draw the member’s attention to those risks
  • continue to communicate with members who remain in the scheme who have flexibly accessed some or all of their pension using options offered by the scheme, as appropriate

Glossary and legal references

Annuity

A specific type of insurance policy, which can be purchased to secure an income for life at retirement

Beneficiary

A person who benefits from a pension trust

Flexible benefits

Pension benefits that may be drawn from a scheme and used for purposes other than purchasing an annuity

RT1Regulations 18A to 20 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulations 18A to 20 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT2Part 1, Schedule 10 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Part 1, Schedule 10 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT3Regulation 18B Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulation 18B Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT4Regulation 18B(3) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulation 18b(3) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT5Paragraph 14, Part 3, Schedule 7 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Paragraph 14, Part 3, Schedule 7 Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT6Regulation 19A Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulation 19A Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT7Regulation 19A(6) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulation 19A(6) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]

RT8Regulation 19A(4) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
[Regulation 19A(4) Occupational and Personal Pension Schemes (Disclosure of Information) Regulations (Northern Ireland) 2013]