On 26 October 2017, the Department for Work and Pensions (DWP) launched a consultation on improving the disclosure of charges, transaction costs and investments in money purchase/defined contribution (DC) occupational pension schemes
(including hybrid schemes with a DC element), apart from:
• Schemes where the only DC benefits are attributable to Additional Voluntary Contributions
• Small Self-Administered Schemes
• Executive pension schemes
The aim is to provide greater transparency for members and enable them to make more informed decisions without overburdening trustees. It is also hoped that the requirements will provide greater clarity as to whether members are receiving value for money.
The consultation was short, ending on 7 December 2017. Alongside the consultation, the DWP has published draft regulations and draft statutory guidance. If the proposals go ahead, the changes will come into force on 6 April 2018 and will be introduced by the Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018.
Defined Benefit (DB) schemes are currently excluded from the proposals, however, the DWP has indicated that it will consider extending the requirements to DB schemes. In addition, in 2018, the Financial Conduct Authority intends to consult on corresponding rules for workplace personal pension schemes and stakeholder schemes.
The proposals
The Government is proposing to introduce regulations that require:
• DC schemes to publish information
on transaction costs and charges and to disclose this to members, beneficiaries and recognised trade unions.
• Information on transaction costs and charges to be published on an internet site that the public can access.
• Benefit statements to include a web address where members can find information on their schemes’ costs and charges.
• The cost and charge information within the annual Chair’s Statement should set out the costs and charges for each fund option.
• Trustees and scheme managers should provide members with an illustration of the compounding effect of their schemes’ costs and charges on the members’ funds.
• A duty should be imposed on trustees and scheme managers to disclose to members and trade unions, on request, the top level of funds (in which members are directly invested), for which public information is available.
• Trustees and scheme managers must prepare and disclose the fund holdings over the scheme year, within seven months of the scheme year end date. They must also respond within two months of a request.
What is the penalty for non-compliance?
The penalties for non-compliance range from £500 up to £5,000 for an individual and £50,000 for an organisation.
Sally Wilton, Consultant at Quantum