Disclosure: Sackers’ response to consultation

Background

A consultation on the proposals and draft regulations on disclosure of information requirements applying to occupational and personal pension schemes was published by the DWP on 6 January 2010.

We support the approach which has been taken following the DWP’s consultation which was conducted between March and May 2009. And while we support the deregulation of pensions legislation generally, (as we noted inour response to the earlier consultation), in our view, the proposal to run a general overarching disclosure principle alongside specific, prescriptive requirements would be unlikely to result in the simplification of the disclosure burdens faced by trustees and employers.

We also reiterate our support for the DWP’s statement in the 2009 consultation that “there is scope for regulations to be significantly restructured and simplified”. Should legislative time allow at some point, we consider that the consolidation of existing disclosure requirements into a single set of regulations would greatly assist those involved in pension provision and administration.

In any event, even if a full consolidation were produced, we acknowledge that it would be logical for certain provisions to remain embedded in their original regulations to deal with a specific issue (with an appropriate cross-reference in the disclosure regulations). Even if this were not possible, it would be very helpful if the non-disclosure regulations (for example those which deal with preservation) could include a cross-reference to the relevant disclosure regulations, thereby sign-posting where the additional disclosure requirements are to be found.

Electronic disclosure

We welcome the DWP’s proposal to facilitate the dissemination of scheme information by email or via scheme websites. This is in keeping with modern business practices and general environmental concerns.

We note that the draft new regulations 7, 7A and 7B under the (draft) Occupational, Personal and Stakeholder Pension Schemes (Disclosure of Information) (Amendment) Regulations 2010 which set out the circumstances in which information and documents can be distributed by email or placed on a website, contain a number of safeguards. These safeguards ensure that members previously used to receiving scheme communications by post are not overlooked when (or if) their schemes adopt electronic communications as the default position.

From experience, people are more likely to change their email address than their postal address, but at the same time may be less likely to consider updating all contacts with their new details. This can cause problems because not all email systems will provide an automatic response that the email account is “dead” or unavailable. This can mean that the trustees believe an email has been delivered when it has not. While it is clearly an individual’s responsibility to update their details, it is important to achieve a balance between simplicity of operation and protection. In our view, the proposals achieve a fair balance between trustees’ responsibility to furnish communications to members, and members’ own responsibility to provide up-to-date contact details.

We consider that there may be a number of additional technical considerations in relation to electronic communication (as well as that identified in paragraph 6) and it would be helpful if guidance were produced to cover certain aspects of system design and administration issues. Examples of other issues which could be covered include:

the requirement to use a system for mass mailings that is capable of receiving bounce-back messages (as not all do), coupled with a requirement for monitoring bounce-back messages so that trustees can follow-up with members by alternative means; and
an updatable contacts section on a scheme website, to make it as easy as possible for trustees to update their contact details.

Time limits

We consider the proposed time limit of one month, for the provision of basic information about a scheme, to be reasonable in the context of aligning general disclosure requirements with the timescales for automatic enrolment schemes and NEST.

SMPIs

The changes to the disclosure requirements for statutory money purchase illustrations or SMPIs are permissive, and we support the proposed simplifications which are designed to ensure ease of use.

However, we query why there will no longer be a requirement to state that the illustration should not be regarded as the only consideration by reference to which the member should make decisions about their pension arrangements. This is a key consideration for money purchase scheme members and we therefore suggest that this requirement is retained.