6th April 2015 saw the new pension flexibility provisions in relation to defined contribution pension arrangements come into force. For more detail on these (which were announced in the Budget last year) please see our various articles in our previous pensions publications. These new pension 'freedoms' mean that DC retirees who choose not to purchase an annuity with their pension pots can draw down pensions without the restrictions that previously applied about the timing and amount of draw down.
Employers should note that:
- Even though these new pension flexibilities have been introduced, pension schemes do not have to offer them and many are feeling that HR and cost considerations make them unattractive. Trustees and personal pension providers are able to offer these flexibilities without employer consent so employers should understand what is available or being considered in relation to their own pension arrangements and should liaise with trustees or providers about what is proposed.
- There may be an increase in enquiries from members/employees about the new pension freedoms and what is available. Employers should consider with their HR and pension teams what is to be communicated in this regard, and indeed should ensure that any written communications with employees, handbooks etc. are updated to reflect the new provisions where necessary, making sure that nothing said constitutes financial advice.
- The legislation requires that where an employer (or someone on its behalf) writes to two or more members or survivors about the options available to them in terms which encourage, persuade or induce the members/survivors to (amongst other things) transfer their DB benefits to other pensions arrangements to access pension flexibilities then that employer must generally arrange and pay for that member/survivor to receive appropriate independent advice. Although this is meant to capture scenarios such as transfer incentive exercises, employers should take care to consider whether or not other similar exercises they wish to undertake might trigger the requirements. For more detail on the new requirements in relation to DB to DC transfers please see our article in the last edition of Pensions Pieces.