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UK pensions speedbrief - DC - developments on disclosure, governance and transfers

  • United Kingdom
  • Pensions - Defined contribution


The Government had a busy week last week and published several sets of regulations which will have an impact on trustees and employers of pension arrangements that provide DC benefits.

The regulations cover a range of issues including new disclosure obligations on trustees, additional requirements in relation to the content of the chair’s statement, new information that will need to be made available on a website and changes to the transfer of DC benefits without consent.

So exactly what is changing and what should trustees and employers be doing?

Chair’s statement

A scheme which provides any DC benefits (except where the only DC benefits are derived from AVCs) needs to prepare an annual governance statement which includes amongst other things, information in relation to the default fund, charges and how they represent value for money and how the trustees have complied with their knowledge and understanding obligations over the past year.  The statement must be signed by the chair, prepared within 7 months of each scheme year end and be made available to members on request.

For scheme years ending on or after 6 April 2018, regulations will require the following additional information to be included in the statement:

  • The level of charges and transaction costs applicable to each default arrangement during the scheme year;
  • The level of charges and transaction costs applicable to each fund members can select and in which assets are invested during the scheme year. Where a fund has “bundled charges” because for example it is a lifestyle fund where charges vary depending on age, a range of charges could be given;
  • An illustrative example of the cumulative effect over time of the application of charges and costs on the value of a member’s accrued rights to money purchase benefits. 

In making these statements, trustees must have regard to statutory guidance prepared from time to time which sets out what the illustration should include.  

The guidance focuses on how trustees should prepare the illustration of the cumulative effects of costs.  It says that it should be a “pounds and pence figure” prepared using a “realistic and representative range of combinations of pot size, contribution rates, real terms investment returns, time and rate of charges and costs” but it “is not necessary to do an illustration for every combination”.  The guidance is not intended to be exhaustive and how trustees present the information is up to them.  It does however set out the factors that trustees are expected to take into account. 

Annual money purchase illustration

One of the key methods by which a member can determine the value of their DC savings is the annual statement that trustees are required to give them under the Disclosure Regulations within 12 months of each scheme year end.   

The information that needs to be included in the annual statement is being updated as follows:

  • From 6 April 2018, there will need to be a statement that certain information in the Chair’s statement (including the new information referred to above) is available free of charge on a publicly accessible website.  Members will need to be given the web address and told if they can request the information in hard copy form (which only needs to be “where the trustees… are satisfied that it would be unreasonable for that person to obtain it from the website on which it is published”). 
  • From 6 April 2019, members will need to be told how they can request information about pooled funds.  This is intended to allow engaged members the opportunity to have a better understanding of the funds their money is actually invested in and improve confidence in saving.  The information must relate to the pooled funds the member is invested in at the date of request, cannot be more than 6 months old and include “the international securities identification number (“the ISIN”) allocated in accordance with ISO 6166”.  This requirement is only intended to relate to the top level of pooled funds invested in by the trustees.


With effect from the end of the first scheme year after 6 April 2018, the details of the default arrangements, charges and transactions costs and the illustration of their cumulative effect included in the chair’s statement will need to made available on a public website.

The Government’s guidance says that: “The information should be published in a manner which allows for the content to be indexed by search engines: If published on the scheme’s or employer’s website, it should not include text which prevents the page from being indexed, and it should be linked to other pages which are found by web search engines; [and]  If published via another website - for example, via a social media site, a blogging tool or a repository offered by a search engine provider – appropriate boxes should be selected to ensure that the document is public and can be indexed”.

The guidance sets out more details about how it is expected that this information will be published.

DC to DC transfers

Currently, to make a bulk transfer of DC rights without consent, actuarial certification is required to the effect that the benefits to be provided in the receiving scheme in relation to the transfer credit will be broadly no less favourable than those provided in the transferring scheme.  This requirement was not drafted with DC benefits in mind and has proved difficult to apply in a DC context where it is not at all clear what actuaries should be looking at when making the comparison.

As a result, amending regulations provide that from 6 April 2018, it will be possible to transfer pure DC benefits (that is DC benefits with no guarantees or promises about amount attaching to them) without consent in the following ways:

  • Prior to 1 October 2019 only, on the basis of the current actuarial certification requirement. 
  • The transfer is made to an authorised master trust.  Although this provision comes into force on 6 April 2018, it is not quite clear yet when the authorisation regime for master trusts will be up and running so schemes may have to wait a little longer to use this transfer basis.
  • If the transferring trustees (or the employer where the sole power to make a bulk transfer rests with the employer) obtain independent advice in relation to the transfer.  The advice must be from someone who is reasonably believed “to be qualified to give that advice by reason of that person's ability in, and practical experience and knowledge of, pension scheme management”.  The adviser’s independence is determined by the trustees (or employer where appropriate), taking into account whether they have received a payment from the receiving scheme trustees or employers (or a group employer) in the previous year.
  • Where the principal employers of the transferring and receiving scheme are part of the same group and the members being transferred are or were employed by an employer within the same group.

Where the employer has the sole power to make the transfer, it must confirm to the trustees that it has taken appropriate advice.  In addition, the DWP says “we would generally expect employers, with a ‘fiduciary like’ role in this instance to robustly assess the merits and suitability of the receiving scheme, and for the trustees, who have a fiduciary responsibility in other areas except those limited by the scheme rules, to consider their fiduciary duty to act in the members’ best interests more broadly”.

The Government’s intention is to publish high level guidance to accompany these regulations before they come into force in April 2018.

These regulations also provide that where members are subject to the charge cap in the transferring scheme, they will continue to be subject to the charge cap in the receiving scheme.  In addition, the charge cap may also apply in the receiving scheme where the member made their original investment choice more than 5 years prior to the transfer.