Since 6 April 1997, members of occupational pension
schemes have had the right to certain information, either
automatically or on request, and, in most cases, within specified
timescales. This includes:
- basic information about the member's pension scheme;
- information about the member's rights and benefits; and
- access to regular scheme reports.
Basic Information
Basic scheme information should be provided automatically to
prospective occupational scheme members within two months of
joining the scheme.
Existing members, their spouses, beneficiaries and trade union
representatives can request such information. This should be
made available to them within two months of being requested.
The following are the main items of basic information to be
supplied to members of occupational schemes.
- The categories of people who are eligible for membership.
- Whether membership is by application or whether entry is
automatic (unless the person elects not to join) or is subject to
the employer's consent.
- The eligibility conditions.
- The period of notice required (if any) if a member wants to end
their pensionable service.
- Whether a member whose pensionable service has ended before Normal Retirement Age (NRA)
may re-enter the scheme and, if so, any conditions that apply.
- How members' normal contributions (if any) and the employer's
contributions are calculated.
- What arrangements exist for members to pay AVCs (this
could include the investment funds available and levels of
contributions that may be paid).
- Whether the scheme has tax approval or, if not, whether HM Revenue & Customs
is considering an application for tax approval.
- Which employments covered by the scheme are, and which are not,
contracted-out and the basis for
contracting-out.
- The scheme NRA.
- What benefits are payable and how they are calculated,
including the definition of pensionable salary and the scheme accrual
rate.
- Whether the scheme rules contain a power to increase pensions
in payment (other than on a statutory basis) and if so, what it is,
who may exercise it and whether, and to what extent, it is
discretionary.
- Whether survivors' benefits are payable and, if so, the
conditions (if any) attaching.
- For benefits other than survivors' benefits, the conditions for
paying the benefits.
- Which benefits, if any, are discretionary.
- The name of the legislation (if any) which sets up the scheme
and determines its benefits (this would apply to some public
service schemes).
- For members whose pensionable service ends before NRA, the
arrangements made, and in what circumstances, for:
- Estimates of cash
equivalents
- Statements of entitlement to a guaranteed cash equivalent
- Preserved benefits or transfers
- Refunds of contributions
- Whether, and in what circumstances, the trustees will accept
cash equivalents and provide transfer credits and whether
acceptance is at the trustees' discretion.
- Where the trustees have directed that Cash Equivalents will not
take account of discretionary benefits, a statement to this
effect.
- A summary of how transfer values are calculated.
- A statement that the Scheme Annual Report and Audited Accounts
are available on request (not required for certain public service
schemes).
- Whether information about the scheme has been given to the
Registrar of Occupational and Personal Pension Schemes.
- Details of the scheme's Internal
Dispute Resolution Procedure (IDRP) (unless the scheme is
exempted from having a procedure) and the address and job title of
the person to be contacted to use the procedure.
- A statement that The Pensions Advisory Service is available at
any time to assist members and beneficiaries with any pension
scheme query they may have.
- A statement that the Pensions Ombudsman may investigate
and determine any complaint or dispute of fact or law in relation
to an occupational pension scheme, giving a contact address.
- A statement that the Pensions Regulator is able to
intervene in the running of schemes where trustees, employers or
professional advisers have failed in their duties, giving a contact
address.
- The address where people should send enquiries about the scheme
generally or about an individual's benefit entitlement.
Contributions
The trustees have the responsibility to advise members if the
employer pays contributions late. Employee contributions must be
paid by the 19th of the following month and they must be informed
within 90 days of that date if they are late by 60 or more
days.
This requirement does not apply to Additional
Voluntary Contribution (AVCs), but failure of trustees to
follow the same rules could be considered as maladministration.
Trustees of an occupational scheme must maintain a schedule of
contributions (for final salary and career
average schemes) or a payment schedule (for money
purchase schemes). These record the contributions due to
be paid by the employer. A member is entitled to a copy of
the relevant schedule.
Benefit statements
Money Purchase Schemes
Members of money purchase schemes should be
provided automatically with an annual statement within 12 months of
the end of the scheme year.
The following information should be
contained in this statement:
- Contributions credited during the scheme year;
- Minimum payments (for contracted out schemes) credited during
the scheme year;
- Value of any Protected Right funds;
- Value of any Non-Protected Rights funds;
- Transfer Value of any Protected Right funds; and
- Transfer Value of any Non-Protected Rights funds.
Final Salary and Career Average Schemes
Members of final salary and career
average schemes do not have an automatic right have to a
benefit statement (although many schemes do issue them to active
members anyway). However, if a member requests a benefits
statement, the trustees must issue one to the member within two
months of receiving a written request.
The following information should be
contained in the statement:
Combined Forecast
With a member's permission, the pension scheme may approach the
Department of Work
and Pensions to obtain details of that member's estimated State
Pension entitlement, and include this information in the benefit
statement. This is called a Combined Forecast.
Click
here for further information about Combined Forecasts.
Early Leavers' rights and benefits
Members of occupational schemes whose pensionable service ends
before the scheme's normal retirement date
should automatically receive documentation relating to their
pension rights and options. This should be sent to the member
within two months of the trustees receiving notification that pensionable service has ended.
Transfers
Final Salary and Career Average Schemes
Members of final salary and career
average schemes who have left pensionable service, can request a
transfer value. The trustees must issue the transfer value
statement within three months of receiving a written request.
The transfer value will be guaranteed for three months from the
stated 'guarantee date'. The guaranteed transfer value will
be paid if the member provides all required information before the
three month guarantee period expires.
The trustees then have up to 6 months from the 'guarantee date'
to pay the transfer value. If they delay payment of a transfer
value without good reason for more than 6 months, they are obliged
to increase the amount of the transfer value either by adding
interest or by recalculation.
Money Purchase Schemes
Members of money purchase schemes can
request a transfer value. The trustees must issue the
transfer value statement within three months of receiving a written
request.
Payment of Benefits
Information about benefits due to members and/or their
beneficiaries at retirement or on death are as follows.
Retirement
Members of money purchase schemes should
receive a statement of their retirement options automatically at
least six months before reaching their Normal Retirement Date
(NRD).
Members of final salary and career
average schemes retiring on their NRD should receive a
statement of their retirement options automatically within one
month following the date the benefit becomes payable. This is
extended to two months for members retiring before their NRD.
Death
Rights and options due on a member's death must be quoted as
soon as practicable and not more than two months after notification
of the death.
Ceasing to Contract-Out
In the event of a money purchase scheme ceasing to be contracted
out, affected members should be informed automatically within
one month. Any related additional information should be provided
within four months of the scheme ceasing to contract out.
Changes
Members and beneficiaries of occupational schemes should
automatically receive notification of changes in basic scheme
information within three months of the effective date of
change.
Changes to benefits in payment should be notified automatically
to members and beneficiaries within one month of taking the
decision to change benefit or, if later, before or within one month
of the effective date of change.
Documents
There are numerous documents that occupational
pension scheme members have an entitlement to receive on
request. However, with the exception of the latest Report &
Accounts, the trustees can levy a reasonable charge for copying,
postage and packing.
Trust Deed & Rules
On request, a member is entitled to receive a copy of the
documentation that governs the constitution and operation of the
scheme. This documentation would normally consist of the trust
deed, the rules and any amending deeds. This information should be
made available within two months of the trustees receiving a
written request.
Report & Accounts
Schemes that are established under trust must produce an annual
report within seven months of the end of the scheme year. This
should be provided on request to members, prospective members,
their spouses, beneficiaries and any trade union within two months
of being the trustees receiving a written request. The annual
report should contain the following information:
- Miscellaneous information - For example, the address to which
enquiries about the scheme generally or about an individual's
entitlement to benefits should be sent.
- Financial Information - For example, a copy of the audited
accounts and the auditor's statement.
- Investment Information - For example, an investment report
giving a review of the investment performance of the fund during
the year and also for a longer period of between 3 and 5
years.
Audited Accounts
Unless the scheme is an earmarked arrangement, the trustees must
obtain audited accounts. This must be done for each scheme year,
and produced not more than seven months after the end of the scheme
year. A copy must be available on request as part of the Scheme
Annual Report.
Information that should be contained in the accounts
includes:
- Movements in the value of the scheme fund during the accounting
year, including contributions and withdrawals.
- Details of the assets and liabilities (other than liabilities
to pay benefits after the end of the scheme year).
- The distribution of the assets between:
- insurance policies;
- fixed interest investments;
- securities (including index-linked);
- equities;
- property;
- unit trusts;
- managed funds;
- loans (whether or not secured by mortgages); and
- cash (whether deposits or 'in hand';)
- Details of which investments are held within the UK, and which
are overseas, and, where any assets or liabilities relate to other
currencies, an explanation of any currency conversion bases.
- Details of any investment (other than in UK Government
securities) which makes up more than 5% of the total value of the
scheme assets.
- Details of any employer-related investments (and any in excess
of the prescribed restrictions on such investments under Section 40
of the Pensions Act 1995).
- A comparison of all the above items between this year scheme
year and the previous one.
- Details of sales and purchases during the scheme year.
- Confirmation that the accounts have been prepared in accordance
with the Statement of Recommended Practice, the guidelines
('Financial Reports of Pension Schemes') published by the Pensions
Research Accountants Group or another organisation approved for
this purpose by the Accounting Standards Board. If this is not
possible, an indication of where there are any material departures
from those guidelines.
The accounts must show a true and fair view of the financial
transactions of the scheme during the year, and the amount and
disposition, at the end of the scheme year, of the assets and
liabilities. This must be confirmed by a report from the auditor
stating whether or not these requirements are satisfied.
The trustees must also obtain a statement from the auditor as to
whether or not contributions have been paid in accordance with the
schedule of contributions (for a final salary or career average
scheme) or payment schedule (for a money purchase scheme). If such
a statement is negative or qualified, an appropriate explanation
must be added.
Statement of Investment Principles
The trustees or scheme manager must put in writing a statement
of the principles governing decisions about scheme investments.
This statement must be provided to scheme members, prospective
members, their spouses, beneficiaries and any trade union within
two months of the trustees receiving a written request.
This statement must cover amongst other things:
- The policy relating to diversification.
- The policy for ensuring the suitability of investments.
- The arrangements for obtaining advice on the suitability of
investments.
- The kinds of investment to be held.
- The balance between different types of investment.
- Risk attitude.
- The expected rate of return on investments.
- Policy for the realisation of investments.
- The extent to which social, environmental or ethical factors
are taken into consideration in the selection, retention and
realisation of investments.
- The exercise of the rights attaching to investments.
Actuarial Valuation
Members of final salary and career avaerage are entitled to
receive a copy of the scheme's last actuarial valuation within two
months of the trustees receiving a written request.
Schedule of Contributions
This document must show the total employee and employer
contributions over a specified period of time (commonly on an
annual basis). This must be provided on request to members,
prospective members, their spouses, beneficiaries and any trade
union within 2 months of the trustees receiving a written
request.
Winding Up
Members and beneficiaries of occupational pension schemes should
receive an announcement automatically within one month of a scheme
starting to wind up. Annual progress updates should then be
provided automatically.
Winding up deferral and priority rules should be provided
automatically to members and beneficiaries within one month of the
decision being taken. Final notification of winding up should be
issued automatically within thee months of liability being
discharged.
Once a transfer has been made the trustees or managers must
issue an additional notice to each member, within one month of
making the transfer, stating the:
- Amount of the payment
- Name and address of the scheme, and
- Date it was paid.
