Disclosure of DC costs and charges NEW!

New regulations require DC schemes to publish additional costs and charges information in the Chair’s statement (applicable to the Chair’s statement for the first scheme year ending on or after 6 April 2018) in respect of each default arrangement and each alternative fund option available and in which member assets are invested. The information must include an illustration of the compounding effect of costs and charges on members’ pension savings.

This same information must also be published on the internet and members who receive an annual benefit statement must be given the web address. Read more

ACTION: Ensure that any processes required to enable this disclosure are put in place. Liaise with asset managers to gather cost information and update processes as required for future Chair’s statements and publication.

Valuing benefits for the advice requirement NEW!

From 6 April 2018, changes apply to how ‘safeguarded flexible benefits’ (such as benefits with a guaranteed annuity rate) must be valued for the purposes of the independent advice requirement. When assessing if members (who seek to transfer, convert or access their benefits flexibly) are required to take independent advice, these schemes must disregard any increase resulting from a ‘higher than best estimate’ calculation of the transfer value.

Trustees of schemes that offer safeguarded-flexible benefits will also be required to provide a warning highlighting the guarantee and its value. The government has published guidance on the new duties and best practice. Read more

ACTION: If your scheme provides safeguarded flexible benefits, liaise with your scheme’s actuary, if appropriate, and administrator to ensure that from 6 April 2018 appropriate processes are in place for valuing benefits for the advice requirement and providing risk warnings.

Bulk transfer of DC rights simplified NEW!

New regulations coming into force from 6 April 2018 simplify bulk transfers of ‘pure’ DC rights (i.e. no guarantees or promises) without member consent. The requirement to obtain an actuarial certificate and other restrictions will be removed. Instead, the decision maker may need to consider the advice of an ‘appropriate adviser’ who is ‘independent’ from the proposed receiving scheme. If the default fund charge cap applies to members in the transferring scheme, the receiving scheme is required to continue to apply the charge cap in respect of those members. Statutory guidance is expected to be published this month. Read more

ACTION: If a bulk transfer of ‘pure’ DC rights was previously considered but was not viable at the time, consider reassessing the position.

TPR governance expectations NEW!

The Regulator has published a statement setting out its expectation of how trustees should manage service providers, which focuses on proper due diligence on appointment, ongoing performance monitoring, retaining oversight and understanding of tasks delegated to providers and ensuring that a comprehensive business continuity plan is in place. Read more

The Regulator has also published the fifth tranche of guidance as part of its ‘21st Century Trusteeship’ campaign, which aims to improve governance standards. The latest instalment looks at the trustee skills and experience necessary to run a scheme well. Read more

ACTION: Review the guidance and consider whether your scheme meets the Regulator’s expectations in these areas.

Protected rights restrictions

When DC contracting-out ended in 2012, all statutory restrictions applying to accrued protected rights were removed. As this did not override scheme rules, trustees were given a statutory modification power, until 5 April 2018, to remove these restrictions by resolution. Schemes that have not yet completed this process should consider urgently whether to do so before the deadline. Read more

ACTION: Check all affected schemes/legacy arrangements have removed protected rights restrictions by 5 April 2018.

Watch this space

– The government is proposing a number of changes this year to help combat pension scams, including changes to statutory transfer rights, banning cold-calling and requiring members to receive (or opt-out of receiving) guidance by a new body. Separately TPAS has published a new guide for members on how to spot and stop pension scams, which may be a useful resource for members. Read more

– New standards for professional trustees are expected to be introduced this month. These could particularly affect trustees who meet the professional trustee description but are not part of a wider professional trustee organisation. Read more