Disclosure requirements enter the electronic age!

Introduction

On 8 November 2010, the DWP published Regulations which make amendments to the disclosure requirements for personal, occupational and stakeholder pension schemes. Principally, these allow schemes to communicate with members electronically, provided certain notice requirements are met. The changes come into force on 1 December 2010.

Key points

The Regulations formalise the requirements for electronic communications between pension schemes and their members.
The requirements for SMPIs have been reduced and certain information may now be sent to the member separately.

Background

Back in July 2007, the Deregulatory Review identified pension scheme disclosure as an area which could lead the way in terms of a principles-based approach to legislation.1 In a March 2009 consultation, the DWP therefore proposed a single overarching disclosure principle, complemented by specific disclosure requirements for particular circumstances. In addition, fixed time limits were to be replaced by “reasonable periods”.2

Responses to the 2009 consultation indicated that the industry found a certain level of prescription to be helpful for both scheme members and professionals. So, these proposals to deregulate disclosure were withdrawn.

Electronic Communications

Following a January 2010 consultation, new Regulations have now been published which incorporate the electronic communication elements of the 2009 consultation.3 They bring the statutory disclosure requirements into the 21st century by allowing schemes to send information to members by email or by posting it on a website.

The Regulations require trustees to be satisfied that the electronic communications have been designed so that scheme members will be able to get access to, and store or print the relevant information (taking into account the requirements of disabled persons). However, members may opt out of electronic communication by requesting (in writing) that they continue to receive information by post.

Notifying members

Many occupational schemes will breathe a sigh of relief that the Regulations incorporate an easement so that schemes which already communicate electronically can continue to do so without issuing a notice to members.

Providing information by email

Those schemes which have not sent information electronically prior to 1 December 2010 and wish to communicate electronically with members must first issue a written notice to members by post. This should state that the trustees propose to provide members with information electronically and give members the option to opt out.

Providing information on a website

If information or documents are made available on a website, enhanced notice provisions apply. When the first information or document is published, a notification must be sent to recipients at their last known postal or electronic address. This should include information such as the website address and details of the place on the website where the information or document may be read.

Subsequent notifications need only inform members that the information is available on the website. Helpfully, such notifications need not be sent to any members who, despite being given or sent at least 3 letters requesting their email address, have not responded by either providing such an address or requesting paper communication.

Statutory Money Purchase Illustrations

There have also been some minor changes to SMPIs, to allow schemes to provide more concise illustrations, reducing the information to be provided. They also allow statements to be provided separately, making use of the electronic communication provisions. But schemes should bear in mind that, if they choose to publish SMPIs on a website, they also need to send members an email (or letter) telling them.

1 Chris Lewin and Ed Sweeney (July 2007) – Deregulatory Review of Private Pensions: An independent report to the DWP
2 For more information, see our Alert dated 16 March 2009: “Fresh approach to disclosure regulation”
3 For more information, see our Alert dated 14 January 2010:”Deregulation of disclosure requirements left out in the cold?“