And The Law Says

DC flexibility – how will this impact on communications to members?

April 15, 2015


Ginevra Gatrell Says: From 6 April 2015 many members of DC pension schemes will have more flexibility in relation to how they choose to take their pension benefits from age 55.

Broadly, the four main benefit options will be:

  • An annuity (or scheme pension if offered by the scheme)
  • Flexible access drawdown
  • Taking a number of cash sums at different stages
  • Taking the entire pot as cash in one go.

The Pensions Regulator has published guidance for trustees and pension scheme administrators on how to communicate with occupational pension scheme members in light of new legal disclosure requirements in relation to the benefit flexibilities. The full extent of information that needs to be communicated to members is detailed and depends on the member’s circumstances. In particular, members must be informed about the availability of Pensions Wise (the government’s advice line) and the option to transfer their benefits to another scheme. Generic risk warnings should be included and members should be asked to confirm whether they have taken advice.

Generally, communications must be sent four months before a member’s retirement date, however there are specific exceptions to this. In other cases, where a member requests information, communications must be sent within 2 months.

Practical impact

Trustees, administrators and employers will need to determine whether their pension scheme offers the new flexibilities and whether any updates are required to pension scheme documentation. In particular all communications with members will need to be reviewed and revised to take into account the new additional information and disclosure requirements.

The Pensions Regulator’s website provides some sample wording for inclusion in member communications in relation to the new flexibilities.

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