The Department for Work and Pensions (DWP) has opened a consultation on new draft regulations and accompanying guidance for simpler annual benefit statements.
These regulations follow on from the Government’s previous consultation response, published in October 2020, on the topic of annual statements. Initially the new measures will only apply to defined contribution (DC) schemes which are used for automatic enrolment purposes.
One sheet of paper
The proposed regulations would require affected schemes to provide their annual benefits statements condensed onto a single, double-sided sheet of A4 paper. The intention is to make it as simple as possible for members to see and understand: how much money they have in their pension plans and what has been saved in the statement year, how much money they could have when they retire and what they could do to give themselves more money at retirement.
Template structure
The DWP has provided a draft template for how a simplified statement might look. Although it is not mandatory to follow the template exactly, one of the DWP’s stated aims is to encourage a greater consistency across benefit statements of different schemes. Pension providers will be required to show ‘due regard’ to the new guidance.
The draft template follows a five-section structure, including:
While there is no change to the list of disclosure information schemes are expected to supply in their annual statements, information which is supplementary to the above categories is not expected to be included in the printed statement. Instead the statements should signpost members to this further information, for example, by providing a web address where it may be found.
Timeframe for adoption
The consultation on the new measures will close on 29 June 2021. It is intended that the new Regulations will apply to all statements issued on or after 6 April 2022. This means that for some schemes their 2022 statements will need to comply with the new format whereas those which issue statements earlier in the calendar year will not be required to adopt the changes until their 2023 statements are produced.
Capita comment
The desire for members to be presented with clear and effective information regarding their pensions is one which should be shared by all, and the push for simpler annual statements dovetails neatly with the Government’s plans for the Pensions Dashboard.
The proposed limit of a single sheet of A4 paper mandated by the draft does propose a challenge for schemes, which will need to find ways to condense a lot of important information into a much smaller space, while keeping everything clear, readable and easily understandable. The draft template provides a structure to follow but the onus falls on trustees and administrators to work together to craft appropriate wording which upholds the principle of simplicity, within the strict space constraints.
Trustees of in-scope schemes will need to review the statements which they currently issue to members and identify changes needed to comply with the proposed measures. They may wish to consider the timing to see whether their 2022 statements will be affected. In addition, trustees of schemes currently out of scope may also wish to take the opportunity to review their own annual statements with a view to simplify where possible.
Please speak to your usual Capita contact if you have any questions.