The government has published final regulations on extending the information trustees must provide to the members of DC Occupational Pension Schemes and Master Trusts. Details here.
The main thrust is greater transparency so schemes must explain more precisely the known factors that affect the value of a member’s retirement fund; this could put pressure on some high charging and legacy arrangements. We agree with this direction, but unless schemes go beyond the basic rules it will be more confusing for members and will turn them off.
For CTC clients
Our clients have the capability to comply with the new disclosure rules and present the information in a personalised communication that is meaningful to the member. Our involvement in personalised communication extends to video as well as online tools.
CTC also offers a Heritage Marketing capability that analyses legacy arrangements and compares tehm with alternatives to determine alternative routes forward for members,
Overview of the regulations
Trustees previously had a duty to provide certain information on default funds. This is now being extended to all funds available to the member. It also includes the requirement to illustrate the effect of fund charges in £/p (but not necessarily on an individual basis). These changes parallel rules the FCA has brought into place for IGCs on Workplace Pension Schemes.
Transaction costs must now be included in disclosure which follows on from the FCA rules that came into force on 03/01/18 (i.e. Mifid II), requiring asset managers to make this type of information fully available.
The disclosure of costs and charges must come into force with the Chair’s Statement due within 7 months of the end of the first scheme year following 06/04/18 (i.e. 06/11/18 at the earliest). The additional investment disclosures must be ready to be available to members from April 2019.
There is a separate document “Cost and Charge Reporting: Guidance for Trustees and Managers of Occupational Schemes” that fully describes what must be included in illustrations; this effectively corresponds to FCA and SMPI rules. The Chair’s Statement needs to include results for a selection of funds, pots and terms if relevant.
The main disclosure requirements are:-
The relevant charges for all funds must be shown on a free to use publicly available website.
The principle disclosure is in the Chair’s Statement.
The FCA is expected to publish similar rules for IGC’s in Q2 2018.
The paper does say schemes can go further to include details for each individual member in the annual benefit statement. Where master trusts have a range of different costs (even different costs for different employers) it may well be easier to provide the information in individual form; this capability is available to CTC clients.
On investment disclosure, members will be able to ask for specific details on the funds they are invested in (i.e. fund fact sheets); they can make one request every 6 months. Even if the trustees make information available to everybody on all the funds they must still indicate to the member which funds they are invested in. They can signpost this information on the annual benefit statement. Providing this online is likely to be the easiest way (but it is not mandatory to do so).