In 2022, there will be two key developments that will change member communications for certain schemes. In addition, the pensions industry will continue to make preparations for the launch of pensions dashboards.
Stronger nudge to pensions guidance
The first key development is that schemes will be required to provide a ‘stronger nudge’ to pensions guidance. This will apply:
- on and from 6 April 2022 for scheme regulated by TPR (i.e. trust-based occupational and personal pension schemes); and
- on and from 1 June 2022 for schemes regulated by the FCA (i.e. contract-based pension schemes).
What are the requirements for schemes regulated by TPR?
Under the draft regulations, the stronger nudge requirements will apply:
- on and from 6 April 2022;
- to the trustees or managers of a trust-based occupational or personal pension scheme that provide money purchase benefits;
- where a member aged 50 or over (or a survivor) with accrued rights to flexible benefits applies to:
- transfer their accrued rights; or
- start receiving scheme benefits.
If this applies, the trustees or managers must:
- refer the member to Pension Wise guidance; and
- offer to book a Pension Wise appointment for them.
Trustees and managers must not proceed with the application unless the member has:
- received appropriate pensions guidance; or
- opted out of receiving such guidance.
What are the requirements for schemes regulated by the FCA?
The FCA has set out the final revisions to its Conduct of Business Sourcebook which will implement the stronger nudge requirements for schemes regulated by the FCA (i.e. contract-based arrangements).
The FCA requirements are similar to those for TPR-regulated schemes. Pension providers will be required to ensure that consumers have either:
- received; or
- opted out of receiving
Pension Wise guidance when they apply to access or transfer their pension savings.
The FCA requirements will apply on and from 1 June 2022.
Simpler annual benefit statements
The second is the roll out of simpler annual benefit statements from 1 October 2022. These will initially apply to defined contribution schemes that are used for automatic enrolment, but this scope could be widened.
Trustees of DC automatic enrolment schemes will be obliged to provide annual statements that do not exceed one double-sided sheet of A4 paper when printed. An exception will apply when it is necessary to meet accessibility requirements under the Equality Act 2010 (e.g. a large print version).
Whilst the DWP has stated that its focus was on automatic enrolment schemes, it urged trustees of other schemes to “apply the same principles of brevity and simplicity” when designing annual benefit statements.
Finalised statutory guidance was published alongside the amending regulations. This covers the content, format and structure of simplified statements along with the design and language used for the statements. The guidance also includes an illustrative template of the two-page statement (click here for the DWP’s ‘How to provide simpler annual benefit statements (19 October 2021)’.
It is important to note that pension providers are not limited to sending just the simplified annual benefit statement. The statutory guidance covers ‘layering’, which states that other documents may be provided in addition to the simplified annual benefit statement.
If sent in a package of material, the simplified annual benefit statement should appear first (or immediately after a covering letter). Trustees or managers of schemes are advised to take a proportionate approach to the provision of any additional documentation and ensure that it is short, simple and accessible.
But perhaps the biggest change will be the work going on in the background to get ready for the launch of pensions dashboards in 2023. As part of this, we can expect:
- the DWP to consult on regulations;
- the Pensions Dashboards Programme to issue further calls for evidence, guidance and standards; and
- the Pensions Dashboards Programme to enter the alpha phase of testing and roll out.
Draft regulations on pensions dashboards and guidance
Draft regulations are due to be made by the DWP under new sections 238A to 238G of the Pensions Act 2004. These were initially expected to be published for consultation late in 2021. This has now slipped, so we can expect a consultation in Q1 2022. This is necessary if the DWP wants to keep to its timetable of laying the regulations before Parliament in summer 2022.
It is also likely that there will be regulatory output on pensions dashboards in 2022. The FCA is expected to consult on proposals to amend its Handbook to include new rules on the provision-of-information requirements being enacted in new sections 137FAA to 137FAC of the Financial Services and Markets Act 2000.
In addition, the FCA is expected to consult on proposed new conduct rules for authorised providers regarding the new regulated activity of providing a pensions dashboard.
TPR is also preparing to provide education and guidance to scheme sponsors and trustees of occupational pension schemes on getting ready for pensions dashboards. This will fit in with TPR’s long-standing focus on the quality of member data (i.e. how accurate and how up to date it is).
Pensions Dashboards Programme continues to develop standards and its procurement programme
Over the course of 2020 and 2021, the Pensions Dashboards Programme made progress on designing and creating the pensions dashboards ecosystem. This contains the digital architecture that will make pensions dashboards work.
The Pensions Dashboards Programme have also been developing the governance framework to support and enable the implementation and operation of pensions dashboards.
In 2022, the Pensions Dashboards Programme will continue to work on:
- design standards for pensions dashboards;
- its data protection impact assessment;
- a consumer-focused onboarding strategy; and
- a communication and education strategy to ensure that pension providers understand their obligations.
In addition, procurement will continue. In 2021, the Pensions Dashboards Programme’s first major procurement exercise saw providers appointed to build the principal digital architecture.
The second major procurement exercise is underway and will see the appointment of a provider for the identity service.
Pensions Dashboards Programme rolls out alpha and beta testing phases
In 2022, the Pensions Dashboards Programme will work with the seven organisations that have signed up for its ‘alpha’ testing phase. This will give the Pensions Dashboards Programme the chance to test and refine the onboarding process during the first half of 2022. Following successful completion of the alpha phase, the participants will transition to a ‘beta’ testing phase.
The Pensions Dashboards Programme will look to expand the number of volunteer data providers engaged in testing at this stage. Alongside this, the second half of 2022 will see the launch of a voluntary onboarding and testing programme.
About the author(s)
Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.