Simplification of annual benefit statements


Earlier this year, the Department of Work and Pensions (the “DWP”) published a consultation on draft regulations introducing new standard requirements for annual workplace pension benefit statements for members (excluding pensioners) of defined contribution workplace pension schemes used for automatic enrolment (known as “Qualifying Schemes”).

While initially the focus of the consultation has been on Qualifying Schemes, the changes being proposed are with a view to the standardisation across all schemes in future. The changes are intended to build on existing plans for the pension dashboard which is designed in part to encourage individuals to engage with and monitor their pension savings.

Following the publication of the consultation, Guy Opperman, the Minister for Pensions and Financial Inclusion, stated that savers were currently being left “puzzled by the complex, sprawling, jargon-filled statements commonly used by the pensions industry”. The intention is that simpler annual benefit statements will set a new standard for how trustees and managers communicate with their members in future.

The DWP is particularly interested in how the use of “simpler and more consistent” annual pension benefit statements across the pensions industry could help improve members’ engagement with pensions more generally. The DWP’s focus is on standardisation with regards to structure, design and content.

The DWP is proposing that, with effect from 6 April 2022, the relevant information must be provided for Qualifying Schemes in a statement not exceeding one double-sided sheet of A4 paper (which may be provided in a printed or digital format). The statement will be required to show members:

  • How much money is in their pension plan in total
  • How much money has been saved to their pension plan over the last year
  • How much money they could have when they retire
  • What steps they could take to have more money when they come to retire.

While the statements themselves will not be required to include wording on charges and transaction costs, clear signposting to a web link showing where and how it can be accessed will need to be included.

Trustees and managers will also be required to have regard to DWP’s statutory guidance. This includes a draft template setting out how the required information may be structured and presented. The DWP is encouraging the voluntary adoption of the principles of the guidance for schemes not within the scope of the new requirements who may find it helpful for any redesign of their annual benefit statements.

The consultation ended on June 29 with the proposed regulations due to come into effect on 6 April 2022. The new requirements will apply to annual benefit statements issued on or after 6 April 2022. There’ll be no requirement to reissue statements given to members before that date.

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