Pension schemes are always up for a challenge and are used to dealing with a constant stream of regulatory change, in addition to the day job of looking after members’ pension pots.
However, the amount of change that schemes are grappling with for April 2015 is unprecedented, with the charge cap, new governance requirements and the Chancellor’s ‘freedom and choice’ reforms.
With just four months to go before launch, legislation to implement freedom and choice is currently progressing through Parliament. Many of the regulations that schemes will have to comply with in April cannot be finalised until the Pension Schemes Bill has received royal assent.
Employers will not see final regulations for months
This means that schemes will not see the final regulations, covering areas such as the new transfer rules and requirements on members’ communications, for several months yet and perhaps not until a few weeks before 6 April.
We have an excellent relationship with the officials at the Department for Work and Pensions and the Treasury working on the new regulations, and are doing all we can to help them draft the rules quickly. We will also be working hard to help pension schemes prepare , with a series of events planned for January and February to update schemes on what we know about the requirements.
To help focus minds, we have worked with schemes and advisers to produce a list of questions that need to be answered so they can prepare effectively for April. There are currently 101 ‘known unknowns’ on that list, so the challenge is significant.
The more preparation time schemes have, the easier it is for them to manage the costs and risks of change. Doing things at the last minute is not impossible, but it is expensive and members can end up footing the bill.
We do not have a crystal ball, but what we do know is that pension schemes will do everything in their power to deliver the reforms in a way that is cost-effective for members and also gives them the best chance of benefiting from the new freedoms.
Richard Wilson is defined contribution (DC) pensions and investment policy lead at the National Association of Pension Funds