6 April 2015 is less than 2 weeks away and there is a huge amount of work to get done between now and then for everyone charged with operating a pension scheme in the UK. No-one is exempt. Although the bulk of the new flexibilities apply solely to DC benefits there are consequential changes affecting DB benefits from 6 April 2015.
The numerous pieces of legislation which implement the pension flexibilities promised in Budget 2014 have only recently been finalised even though some of the guidance for trustees, administrators and advisers is yet to be. Nevertheless the obligations will kick in on 6 April 2015, so trustees should be checking their administrators have the necessary practical changes in hand to ensure they are ready (or as ready as they can be) on 6 April 2015.
- Retirement process: New statutory disclosure requirements need to be built into the retirement process. These include provision of information to members about their DC and flexible benefits, directing members to where they can receive impartial guidance and in particular providing information about the new Pension Wise guidance service. Trustees should ask their administrators to confirm that the procedures used on their behalf will meet these new requirements as of 6 April 2015.
- DC transfer process: Members’ statutory transfer rights to transfer DC benefits will no longer fall away 12 months before normal retirement date. In addition members will have a right to request a transfer-out of their DC only benefits (e.g. DC AVCs leaving DB benefits behind). Processes and communications will have to be changed accordingly.
- DB transfer process: Trustees will be required to check that a member with DB benefits has received “appropriate independent advice” if asking for a transfer to a DC or flexible arrangement where the value of the member’s benefits is at least £30,000. That means obtaining written confirmation from an appropriately authorised financial adviser to say the member has been given advice and checking the adviser’s authorisation with the Financial Conduct Authority – more new processes and more new communications required!
- DB transfer requests: An increased number of members may seek to transfer their DB benefits to DC arrangements which enable them to access their benefits flexibly. Trustees may wish to ask their administrators to report on the frequency and volume of such requests so any funding and/or liquidity impact of changed patterns of transfers-out can be monitored.