The department for work and pensions has cut the amount of time that the trustees of a defined contribution scheme have to tell a member about the open market option.
According to a statement from The Pensions Regulator, as of 6 April trustees will only have to inform scheme members of the open market option four months before their retirement date, rather than the previously required six months.
The Pensions Regulator said: “Trustees must also ensure that if they use ‘lifestyling’ in their investments then they [must] notify members of this on at least two occasions.”
A spokesperson for TPR said the changes bring DC pensions law into line with the requirements surrounding personal pensions.
However, Laith Khalaf, head of corporate research at Hargreaves Lansdown, said the move seems to go against the trend of increased communication requirements in the light of the changes to pensions rules announced at this year’s Budget, when chancellor George Osborne stripped away all caps and limits on drawdown.
Mr Khalaf said that although the move brings requirements into line with those held by the Financial Conduct Authority, which he says requires members be contacted between six and four months before retirement, the change goes “kind of against the grain” in light of a push by government and regulators towards better communication between parties and improvements to member education.
He said: “The point is realistically with all the changes that are going through next April, actually people need to be talked to about their retirement options way in advance. We are talking years rather than months.”
The Association of British Insurers’ code of conduct requires customers to be contacted between five and two years prior to retirement to encourage them to start considering their options.