The Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) Regulations 2015

[F1 Content of risk warnings in relation to safeguarded-flexible benefits U.K.

8C.— (1) In this regulation—

“the Disclosure Regulations” means the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013;

“pension illustration”, in relation to a member’s or survivor’s subsisting rights to benefits under a pension scheme, means an estimate of the amount of a pension which may accrue to the member or survivor, or be capable of being secured by the member or survivor, in respect of those benefits;

“relevant guarantee” has the meaning given in regulation 8B;

“retirement date” has the meaning given in regulation 19(5) of the Disclosure Regulations (first information on accessing benefits);

“statutory money purchase illustration” means a pension illustration provided in accordance with regulation 17 of, and Part 2 of Schedule 6 to, the Disclosure Regulations (statements of benefits: money purchase benefits; pension illustration).

(2) A risk warning required by regulation 8A in relation to a member’s or survivor’s safeguarded-flexible benefits must include—

(a) a prominent statement that the member’s or survivor’s benefits under the scheme include a potentially valuable guarantee (or, where relevant, more than one such guarantee) which will be lost if he or she proceeds with the proposed relevant transaction;

(b) where the proposed relevant transaction will proceed to completion without further action by the member or survivor, a warning that the member or survivor must inform the trustees or managers if he or she does not wish the transaction to proceed;

(c) for each relevant guarantee in relation to those benefits, a clear and intelligible explanation of—

(i) its key features;

(ii) the circumstances in which the member or survivor will have an opportunity to take up the relevant guarantee;

(iii) any circumstances in which the member or survivor will lose the opportunity to take up the relevant guarantee under the scheme (whether in relation to all of their subsisting rights in respect of safeguarded-flexible benefits, or part only); and

(iv) any other material restrictions or conditions to which the member’s or survivor’s opportunity to take up the relevant guarantee is subject under the scheme;

(d) two pension illustrations (“the first illustration” and “the second illustration”) in relation to those benefits, calculated in accordance with paragraphs (3) and (5) respectively;

(e) a statement that, depending on the member’s or survivor’s age, pensions guidance (as defined in regulation 2(1) of the Disclosure Regulations (interpretation)) may be available to help the member or survivor to understand their options in relation to what they can do with their safeguarded-flexible benefits; and

(f) the information listed in paragraphs 2 to 4 of Schedule 10 to the Disclosure Regulations (information on the Pensions Guidance).

(3) The first illustration in relation to the member’s or survivor’s safeguarded-flexible benefits must be calculated using the following assumptions—

(a) the date on which the pension commences payment (“the pension commencement date”) will be the date closest to the member’s or survivor’s retirement date which satisfies both of the following conditions—

(i) the member or survivor has an opportunity to take up any relevant guarantee on the date; and

(ii) the date is after the risk warning is provided;

(b) the member or survivor will take up any relevant guarantee in relation to the pension; and

(c) the amount available for the provision of the safeguarded-flexible benefits to the member or survivor will be an amount determined—

(i) having regard to the value of the member’s or survivor’s subsisting rights in respect of those benefits on—

(aa) where there is a valuation date, that date; or

(bb) otherwise, a date chosen by the trustees or managers, which must be within one month of the date on which the risk warning is provided; and

(ii) using the same assumptions that would be used if the first illustration were a statutory money purchase illustration, except to the extent that paragraph (4) permits the use of different assumptions.

(4) The assumptions used may differ from those specified in paragraph (3)(c)(ii) to the extent that—

(a) where it requires an annual rate of return of greater than 5% to be assumed, a rate of 5% may be assumed instead; and

(b) where it requires an annual rate of increase in earnings of less than 4% to be assumed, a rate of 4% may be assumed instead.

(5) The second illustration in relation to the member’s or survivor’s safeguarded-flexible benefits must be calculated using the following assumptions—

(a) the pension commencement date and the amount available for the provision of those benefits to the member or survivor will be the same as those assumed for the first illustration; and

(b) the amount referred to in sub-paragraph (a) will be converted into a pension at a rate determined using assumptions which are—

(i) so far as possible, consistent with those used for the first illustration in respect of—

(aa) any lump sum payable in connection with the commencement of the pension;

(bb) any entitlement to increases in payment in relation to the pension, and the rate of any such increases;

(cc) the potential for payment of any benefits in respect of the pension on the death of the member or survivor after the pension commencement date, and the amount of any such benefits; and

(dd) the payment frequency of the pension; and

(ii) otherwise, the same as those that would be used if the second illustration were a statutory money purchase illustration.]

Textual Amendments

F1 Regs. 8A-8C inserted (6.4.2018) by The Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) (Amendment) Regulations 2017 (S.I. 2017/717), regs. 1, 4