DC “Simpler Statement” requirements to apply from October 2022

If you work in pensions and can’t say “I know what simpler annual benefit statements are”, you’ll want to read this.

The new legal requirements for a shorter, simpler annual member statement for certain schemes (which we last reported on in January) kick in one month from now on 1st October, following the laying before Parliament of the concisely titled “Occupational and Personal Pension Schemes (Disclosure of Information) (Statements of Benefits: Money Purchase Benefits) (Amendment) Regulations 2021” last October.

The DWP’s stated aim in introducing these requirements was to help savers better understand their pensions and effectively plan for retirement by making annual statements simpler, shorter and more consistent across different schemes.

 Who do the new requirements apply to?

The new requirements apply to DC-only auto-enrolment schemes. DC schemes not used for auto-enrolment and hybrid schemes (including DB schemes with AVCs) are not obliged to adopt simpler benefit statements, but may wish to do so regardless for consistency with other schemes.

What are the new requirements?

Annual statements given to active and deferred members of DC-only auto-enrolment schemes are now restricted to two sides of A4 when printed (with an exception for formats provided to comply with the Equality Act 2010, such as large print formats). The same size restriction also applies to statements provided by email or online.

Schemes must also have regard to guidance issued by DWP on content and layout. The full guidance, along with a template example of a simpler benefit statement can be found on the DWP’s website. Some points from the guidance that schemes should be aware of include:

  • The language used should be simple, accessible, and jargon-free
  • The typeface and font should be of a size that is easily readable and accessible
  • The statement can use a provider’s own colour scheme so long as this doesn’t prevent the remaining requirements from being met.

The five sections

The DWP guidance also divides the existing information required in annual statements into 5 sections:

  1. Member and pension plan details
  2. How much money you have in your pension plan (including that year’s savings and details of transaction costs)
  3. How much money you could have on retirement (including any assumptions used for retirement income illustrations, and a disclaimer that the illustration isn’t guaranteed)
  4. What you could do to give yourself more money (prompting the member to think about retirement income as a whole, including State Pension, and the impact of saving more or retiring later)
  5. “Find out more” (how the member can request a hard copy of this information, further information, or update their details)

What about additional documents?

 It’s common for schemes to include a covering letter or FAQ document with their statements, and DWP guidance confirms that (thankfully) this practice can continue and will not count towards the limit of two sides of A4. However, the guidance states that (other than covering letters) the statement should be the first document provided to the member, with any supplemental documents following after it.

What next?

 The Minister for Pensions and Financial Inclusion, Guy Opperman, has previously stated that “it remains the long-term ambition to improve consistency across all schemes”, so we may see the regime extended to other occupational schemes in future. The current information requirements are required to be reviewed every five years, with the first report due by 1 October 2027, after which we may see further developments.

If you have any questions on the new requirements and how they may apply to your scheme, feel free to get in touch with us here at Sackers.

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