Draft pension regulations on the disclosure of information scheduled to come into effect in October, will no longer go ahead.
The move follows an announcement in the pensions white paper in May of a new drive to simplify pensions legislation through a ‘rolling deregulatory review’ of the regulatory burden around occupational pension schemes.
James Purnell, Minister for Pensions Reform, says the Department for Work and Pensions’ (DWP) goal is to strengthen quality occupational provision already being offered by reducing costs and red-tape.
As a result he says the government has decided to stop the introduction of the Occupational Pensions Schemes (Disclosure of Information) Regulations, which had already been through the consultation process, with the 32 regulations and 19 schedules intended to be introduced in October.
The proposed Regulations included requirements for Defined Benefit (DB) schemes to provide annual statements of members’ pension benefits, along with the concept of disclosing information within a “reasonable time” where previously there had been fixed time frames.
Purnell says: “We want to take a step back and look again at the broader framework of regulation. That’s why we have decided not to go ahead with this package of regulations.”
“It would not be fair to employers,” says Purnell, “to bring in further requirements only for these to be changed as part of our deregulatory review.”
John Lawson, head of pensions policy at Standard Life, says the move is disappointing as the main thing about the regulations was it would have required DB schemes to issue annual benefit statements in current money terms, as is now the case for Defined Contribution (DC) schemes.
As the government continually repeats the idea of education and wants people to engage with pensions, Lawson says the decision to stop the introduction of the regulations has removed a large part of this process.
He says: “Around two-thirds of the assets held for retirement in the UK are held in DB schemes, so its by far the most dominant method of provision and if you don’t tell people what they’re getting how are they supposed to plan for the future.”
However Lawson admits it is probably a sensible move to delay the implementation while the deregulatory review is carried out, as possible issues the government intends to look at, such as the mandatory indexation of pensions in payment (escalation), would affect how DB schemes would calculate annual statements.
Lawson says DB schemes could spend a fortune building systems to work out the different rates of escalation before and after 1997, and how accrued rights under section 67 and the Guaranteed Minimum Pension (GMP) would all be calculated into today’s money.
He says: “it is a big turnaround and it is disappointing to some extent, but if the next big thing is a National Pension Savings Scheme (Npss), then the government will be looking to have this back on track long before the Npss comes into being so people can plan how best to save.”
But he warns the move is only a sensible one if the deregulatory review actually provides a simplification of the regulatory burden and removes some of the issues which could be a barrier to DB schemes setting up a simple statement system.
“Hopefully they will get on and do the deregulatory review quickly so they can try and get this back on track as soon as possible, although if they don’t manage to achieve much simplification then the delay is not going to have made it any easier for schemes to implement,” adds Lawson.
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