Pensions Bulletin 2022/20
Our viewpoint
26 May 2022
- FCA and Pensions Regulator to develop common approach for value for money in DC schemes
- Stronger Nudge requirements come into force before Queen’s Platinum Jubilee weekend
- Clock ticking towards DC simpler annual benefit statements
FCA and Pensions Regulator to develop common approach for value for money in DC schemes
The Financial Conduct Authority and the Pensions Regulator have confirmed they will develop common measurements intended to allow industry professionals and pension savers to better compare value for money across different DC pension schemes – whether contract or trust-based.
A feedback statement, following the joint discussion paper launched last September (see Pensions Bulletin 2021/39), has also been published. It demonstrates that there is support across the industry for a consistent approach to the issue. However, the feedback received also shows how complex this is to achieve, that there are different views about how to do so, and that there are a number of areas where there is no clear consensus as to the way forward.
The feedback statement summarises the responses received but the regulators have not provided their policy response at this time. Instead, the two regulators state that they will continue to engage with industry and consumer groups in the coming months.
The FCA, the Pensions Regulator and the DWP will work together and publish a consultation towards the end of 2022, setting out proposals. The regulators also state that they intend to seek further input from stakeholders over the coming months, including input from consumer representative bodies, before finalising proposals for consultation.
Comment
We continue to support the principle of creating a value for money framework applicable across all DC pension schemes since the vast majority of members will not recognise – or care about – the different regulatory regimes. But as we commented last September, this discussion paper was only the start of the journey, and the feedback statement makes clear that there is still quite a long way to go before there is a unified single approach for assessing value for money across all DC schemes.
Stronger Nudge requirements come into force before Queen’s Platinum Jubilee weekend
The “Stronger Nudge” requirements, that apply where those with “flexible” (ie mainly money purchase) benefits are proposing to access or transfer such benefits, come into force on 1 June 2022, the day before the extended bank holiday weekend.
The Pensions Regulator has now updated its communicating and reporting guidance for DC schemes with links to the online booking tool and telephone number.
Comment
As we said last month (see Pensions Bulletin 2022/16) scheme administrators should be finalising the adjustments needed to their processes for the stronger nudge, so that they are ready to operate them in respect of requests received from 1 June 2022. However, given there is a certain amount of timing leeway within the context of disclosure requirement deadlines, it is likely to be a little while before members actually start to receive a nudge.
Clock ticking towards DC simpler annual benefit statements
It is only four months to go until the simpler annual benefit statements for DC schemes come into effect on 1 October 2022. We covered the Government’s consultation response about this in Pensions Bulletin 2021/43 and to recap briefly benefit statements issued by DC schemes (but not hybrid or DB schemes) from that date should not exceed one double-sided sheet of A4 paper, although additional information can be provided through separate documents.
The key point to note is that it appears that the new requirements apply for any statements in scope issued after 1 October 2022, even if their “as at” date is before that date. So, for example, benefit statements produced as at 30 June 2022 but not issued to members until, say, early October (because of delays in receiving information from third parties) will have to comply with the new requirements.
Therefore, these new requirements will have an impact on statements being produced this summer – either because there will be pressure to produce and issue them before 1 October or because processes will need to be modified to produce compliant statements that are issued after that date.
Comment
Trustees of DC schemes should be checking that their administrators are on top of this issue and have plans in place to issue compliant statements this summer and beyond.