R u ready?
The Department for Work and Pensions has issued amendments to the Disclosure of Information Regulations applying to occupational pension schemes from 1 December 2010. Of interest to pension scheme trustees is the recognition of the use of electronic communications in satisfying information requirements. This development will help to bring pension communications into the 21st Century – some might consider that it is long overdue.
Fortunately, the DWP has not taken modernisation too far. Communications do still have to be provided in clear English even for our ‘text speak’ generation (until such future point that all ‘text speak’ is recognised by the Oxford English Dictionary!) The average pensioner may, however, be relieved to find that he will not be faced with messages such as “Lmk ur addy. Tuvm. The Trustees :-)”. (Translated for the over 25s as: “Let me know your address. Thank you very much”). LOL.
The Disclosure of Information Regulations specify the information that trustees must provide to scheme members (ie active members, deferred members, pensioners and other beneficiaries) and to other parties with an interest in the scheme. Some information has to be provided automatically (such as basic scheme information that is normally contained in member booklets) and some information is provided following a request (such as a copy of the trust deed and rules or the latest actuarial valuation).
In 2009 the DWP briefly flirted with the idea of moving to a principles based disclosure regime but ruled this out after receiving feedback during consultation that this approach could create uncertainty and may be counter-productive.
Currently, information has to be provided to members in writing. From 1 December it will be possible to satisfy information requirements by sending an e-mail or by posting material on a website. Where trustees intend to use websites they must first send a notification to members’ last known postal or email addresses. Subsequent changes to the information provided on the website must also be notified to members . Members who do not wish to receive information electronically can opt instead to be provided with written information.
Trustees do not have to make any changes to their current methods of communication – electronic communication is optional. Considerations for trustees will include:
- The age profile of the membership which (without being ageist!) is likely to impact on how widely electronic communications will be used.
- Potential savings in postage and printing costs – the larger the membership the greater the savings.
- The occupations of the membership – active members in an office based environment are likely to be able to access pensions communications at work. This may not be the case for retail/factory/manual workers.
- Access to technology via the sponsoring employer. It may be that web designers can be made available without the trustees having to incur fees from external providers.
The amended regulations also simplify the information that must be given to members on statutory money purchase illustrations.
A word of warning
Hammonds welcomes these changes and the use of electronic communication will be appealing to many schemes. However, trustees and sponsoring employers should remind themselves that electronic information will be relied upon by members making future financial decisions and may be used by the Pensions Ombudsman and the Courts in the event of complaints and disputes. The fact that emails and websites look less ‘formal’ does not change the fact that the information needs to be correct and fully compliant. Trustees should have a robust system in place for reviewing information before it is posted on a website or issued as a general electronic communication. Hammonds can assist trustees and employers in ensuring that scheme websites and electronic communications comply with trust deed and rules and relevant legislation.
Trustees are advised to consider their communication objectives and materials in light of the changes highlighted in this document and in view of the significant pensions developments that may make member communications necessary or desirable over the coming months. (See our Autumn Review for further details.)