Communicating reporting DC pension schemes

As the trustee of a pension scheme providing defined contribution (DC) benefits you should make sure you understand your members’ views and needs. You should communicate with them at the right time and in the right way to help them make good decisions. Understand your duty to prepare a chair’s statement.

Published: July 2016
Last updated: March 2024

See all updates to this guidance

27 March 2024
Minor changes throughout to make sure the guidance aligns with the new code of practice.

20 October 2023
Replaced part of the annual benefit statements section with a link to Department for Work and Pensions guidance on simpler annual benefit statements.

24 August 2023
Reporting section updated following changes to legislation.

28 March 2023
Updated to help improve pension schemes' equality, diversity and inclusion.

31 May 2022
Clarified that the new Pension Wise guidance requirements don't apply to communications sent after 1 June if the application was being processed before 1 June. Added a reference to 'stronger nudge'.

27 May 2022
Link to the Pension Wise signposting letter updated.

18 May 2022
Added details of how to book a Pension Wise guidance session to the section on directing members to Pension Wise guidance.

17 March 2022
Removed references to explaining the nature and purpose of Pension Wise guidance from the section on directing members to Pension Wise guidance.

2 March 2022
Retirement communications section updated with new stronger nudge to Pension Wise requirements and pension flexibilities information migrated from a separate PDF guide. Appendix 2 updated to reflect stronger nudge requirements.

23 September 2021
Chair's statement section updated with the new legal requirement for smaller DC schemes to carry out a detailed value for members assessment and to include return on investment information for each investment arrangement. Chair's statement PDFs updated with the same requirements.

30 June 2021
Minor amends to reflect the new MoneyHelper brand and website being provided by the Money and Pensions Service.

5 August 2019
New section added and other small changes made to reflect amendments to the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 regarding the provision of information about pooled funds. Under ‘Schemes in wind up’, clarification provided about preparing a chair’s statement where a scheme ceases to be a relevant scheme. Minor updates to reflect the bringing together of Pension Wise, the Pensions Advisory Service and the Money Advice Service into a single body - the Money and Pensions Service.

28 July 2016
First published.

The rising cost of living is affecting savers. Some may approach you for help if they feel they can no longer afford to pay into their pension. Others may look to access cash from their pension pot to pay essential bills. Both scenarios carry risk.

We strongly advocate the importance of saving into a pension and we urge savers to maintain their pension contributions. For some, stopping contributions could have a serious impact on retirement living standards.

You should refer those who are worried about money to the government-backed MoneyHelper service which can help them manage their money in uncertain times.

You must ensure specific checks are made when dealing with transfer requests.

Knowing your members and seeking their views

There are a number of areas where having an understanding of your members is key, particularly in gauging member views to inform the design of investment strategies and the assessment of value for members.

There are a number of ways you can find out about their views and needs in relation to the scheme. You should choose methods that are appropriate and proportionate according to the size of the scheme and available resources, and which are most likely to engage the scheme members, or groups of members. Relevant multi-employer schemes might also consider using some of these methods to seek views from their members as required of them in law.

Using existing knowledge and data

Tapping in to the trustees’ and the employer’s existing knowledge about members should not be overlooked. Member nominated trustees in particular may be able to provide feedback, as might union representatives, other employee representatives or existing staff forums. Information about the scheme’s membership provided to you in administration reports may also provide some insight.

It might suit your scheme to focus on alternative methods of research such as monitoring social media and web forums or tracking the use of digital services, such as website visits and the number and type of emails opened by members.

Member surveys

These could be sample-based or otherwise. It could form part of the existing communications, or you may be able to carry out online surveys, eg using existing online member access portals, or where there is no existing mechanism, or less available resource, other available free online survey tools.

Where possible, spending some time with the scheme administrator and listening to calls from members are very effective ways to gain a better understanding of member needs. It might also be possible to introduce an automatic request for member feedback following a customer service call. The data provided in your administration report (see administration guide) about call subjects, complaints and recurring issues can also give you a view of members’ concerns.

Other member engagement methods

These might include:

Running workshops or speaking events through the employer can give members an opportunity to hear about the scheme and retirement planning generally, and a chance to ask questions and voice their views.
Holding a member AGM or inviting members to the scheme’s AGM can provide similar opportunities.
Focus groups or forums to ask for members’ views on particular aspects of the scheme and its services.
Larger, more complex schemes could consider setting up a regular member panel to represent the wider membership and provide feedback to the trustee board on particular issues.

None of these methods can guarantee that members will engage in sufficient numbers and provide the information that you need to inform your decisions. The chances of members engaging with the issues that affect them can be greatly improved by communicating with them in the most effective way.

Communicating with members

Good member communications are vital if members are to engage and make decisions that lead to good outcomes in retirement.

Good communications are:

accurate and relevant – the right information at the right time and in the right format
clear and easy to understand – written in plain English
accessible – to those with temporary or permanent disabilities
inclusive – considerate of the diverse range of backgrounds, needs and vulnerabilities in the membership

You cannot have good communication without all of these aspects.

Tips for good communication

Make sure communications are accurate and contain the right information

Communications sent to members should contain accurate information that helps members understand the various processes that may impact them.

For example, if a member has requested a transfer from the scheme, communications about the transfer should make clear the steps that must be taken to complete their transfer request, so they have realistic expectations about the length of time it may take.

Tailor the format of your communications to member preferences

You should consider the format of communications sent to members, and tailor them to the audience as far as possible. For instance, if the membership is known to be technologically savvy, then electronic communications may provide a more effective and engaging way of communicating, and vice versa. You can check preferred methods of communication, by asking your members, member nominated trustees or member representatives, or by looking at available research and considering how it aligns to your own members.

Write clearly and in plain English

You should ensure that all communications sent to members are clear, relevant and in plain English.

Members need to make choices when they reach retirement, and trustees have an important role in preparing members to make these choices through effective communication.

Clearly written information will help members make informed choices for their retirement. Setting a standard for your communication will help everyone who talks to your members (for example, your administrators or other service providers) write in the same way.

Make communications clearer by:

directly addressing readers – use ‘you’ rather than ‘members’
making sentences ‘active’ not ‘passive’ – “We’re following up your complaint.” (active) rather than “Your complaint is being followed up.” (passive)
avoiding jargon where possible – and explain any technical terms clearly
making your language consistent – do not use different terms to refer to the same thing
getting colleagues or focus groups to review them
reading your copy aloud – to check it’s in a simple, conversational style

Look at other ways to help members make decisions

Different communication styles and formats may be effective for different segments of your membership.

Consider the role that technology can play in communicating with members. This can be particularly helpful where you are encouraging members to continue saving and perhaps save more. It can also help you to use member communications as an opportunity to improve the accuracy of member records.

Examples of things you could offer:

Online tools that model outcomes and the effects of different choices, for example, how it affects outcomes if a member contributes more.
If your scheme is unable to provide such tools directly, signpost members to available, free tools instead – for example, the MoneyHelper pension calculator.
Innovative ways of getting members to think about pension savings – for example, online games.
Allowing members to do more administrative tasks online in a safe and secure way – this could be updating personal details or making requests for fund switching.

Make language inclusive to make members feel seen and valued

Words can invite people into a conversation but can also form barriers. This could be through the use of overly complex or intimidating language, acronyms, jargon or long sentences.

Language fixes are often small, practical steps that can be made quickly – but can have significant impact.

Use correct pronouns

Research indicates that the use of correct pronouns can have an impact on an individual’s wellbeing. In communications directly addressing members, it’s important to use the correct pronoun and in more general communications, you should consider whether to use they/them rather than gender specific pronouns.

Check for bias

Unconscious bias relates to beliefs and intentions which are shaped by society, upbringing and environments. They are often deeply engrained and automatic, and can create gaps in understanding which affect behaviour.

We all have unconscious biases, and while in most cases they will fall short of overt discrimination, they may result in unconsciously favouring a person of a particular demographic. This is often unintended, but it can affect decisions made by the reader. It is important that all communications are checked for bias.

Avoid stereotypes

Any visual or verbal communications should not stereotype or degrade people based on personal characteristics, for example gender, gender expression, race, ethnicity, socio-economic background, disability, religion, sexual orientation.

Some common stereotypes:

Young people being good with technology.
Men being portrayed as dynamic, academic or career driven.
Women portrayed as homemakers, creative or nurturing.

Avoid words with negative connotations

Check the words and phrases you’re using do not have negative connotations or historical context which detract from your message – for example, masculine and military metaphors such as ‘battleground’ and ‘serve for a term’ can deter people. Feminine phrases or neutral do not.

Check terms for national origin, race, sexual orientation, or gender identification for specific audiences, and if you are not sure then consider asking someone from that audience group whether they would be happy to help you.

Communications should be accessible and reflect the diversity of your membership

A survey by the Department for Work and Pensions reported that 22% of people in the UK are disabled and prevalence of disability increases with age, rising to 42% of people of state pension age. You have legal duties to ensure that your communications are accessible for disabled people. Disabled people are likely to make up a significant proportion of your membership.

Communications may need to be provided in a range of formats and you should let members know that they can also request alternative formats to suit their particular requirements. There is guidance on accessible communications on GOV.UK.

Communications should be accessible to everyone including those with, for example:

visual impairments
hearing impairments
learning disabilities and literacy difficulties
co-ordination or mobility difficulties (most relevant when planning open days or roadshows)
neurodiversity
those who lack technology or confidence in using technology

If you can, gather data to understand your audience and develop appropriate accessible content based on that. If you don’t hold detailed diversity data on your membership you should assess your communication materials from the point of view of as many different backgrounds or requirements as possible.

Check the readability of your content

People with some learning disabilities read letter for letter, and people with learning disabilities may struggle with longer sentences. Using common words can help users understand sentences of around 25 words. See readability guidelines for advice on clear language and content design. Examples include: ‘buy’ not ‘purchase’, ‘help’ not ‘assist’, ‘about’ not ‘approximately’.

Simple, concise content and messaging benefits everyone. For example, higher literacy level users tend to skim read, and have a particular need for content in plain English. They do not have time for lengthy, complex content.

Think about vulnerable members

In the UK 46% of people are considered as vulnerable. These vulnerabilities can result from poor health, experience of negative life events, low financial resilience and low capability. These characteristics may mean such members have different needs and may be less able to represent their interests when engaging with decisions about their pension and may be more vulnerable to exploitation by others, including pension scams.

It’s reasonable to assume that some people within your membership will have a vulnerability. You will need to take extra care when communicating with these members.

There is likely some overlap between the group of members who are vulnerable and the group of members who are disabled, but it is important to remember that not all disabled people are vulnerable and to communicate accordingly.

Further resources for creating communications

There are various resources that provide good examples to help you communicate to members, such as the NEST golden rules of communication (PDF download). (Link provided with the kind permission of NEST Corporation. This document is provided for illustrative purposes only, any form of reproduction of all or any part of this document is not allowed. Visit NEST’s website.)
There are specialist communications firm you can engage if resources allow – or your existing advisers or administrators may be able to provide you with similar advice and services too.
Guidance on inclusive communication on GOV.UK. This recommends that the simplest way to develop inclusive communications is to create a document in plain English, as concisely as possible, with a minimum 14-point font. This reduces the need for alternative versions such as
picture based or translated versions, or captions.
GOV.UK also provides guidance on content design for websites.
Consider whether language is consistent with the social model of disability. The social model of disability recognises that an individual with an impairment is only disabled because their needs are not met by society. The language used in relation to disability can reflect a negative view of disabled people as being ‘victims’ or ‘objects’. See Social Model of Disability: Language | Disability Rights UK for further information.
There are various apps or software that can review gender bias and readability, which you can look into.

Reviewing your communications

How often you should review your member communications will depend on a number of factors, including:

member engagement – if your members are engaged and continue to be so then it may not be necessary to review your communications as often
changes in the demographic of your members – this affects whether the language and format of your communications remains appropriate
changes in legislation
changes in your scheme’s design – for example, changes in contributions or investment options
innovations in technology that become available, or more accessible

At all times, it is important that the communications members receive contain all the relevant information to help them make good decisions about their retirement saving throughout their membership period (including as a deferred member).

Information to provide in the annual benefit statement

You should provide ongoing communications throughout membership to help members prepare for the choices they’ll have to make at retirement. One of the most important ways of supplying this information is through the annual benefit statement.

There are a number of key areas that you are required to cover in the benefit statement itself, which are set out in legislation. Some of the key components relate to:

Contribution levels – how much the member and employer have contributed to their pension over the last year, and what the contribution levels will be in the future. This should also show the tax relief that has been received on behalf of the member in a relief at source arrangement.
The current value of the member’s pension savings and an illustration of future pension entitlement using assumptions prescribed in law.
Chair’s statement: if your scheme needs to prepare a chair’s statement, the address of the website where the trustees have made publicly available and free of charge, certain information on investments and costs and charges that appears in that statement.
Pooled funds: members of such schemes must also be told that they can request certain information relating to pooled funds in which they are directly invested.

You’ll need to identify the correct times to engage as required by the law and have a clear communication plan.

It’s also important that members have enough information to make good decisions. You may need to provide this even if it’s not prescribed by legislation.

Read Department for Work and Pensions guidance on how to provide simpler annual benefit statements.

Communications in response to member requests

You have a duty to disclose a variety of other information when it is requested by members, beneficiaries and unions. This includes, but is not limited to the chair’s statement, the statement of investment principles (SIP), the annual report and accounts, and information about scheme processes and service providers.

You are free to go beyond legal minimums and proactively publish this information, or give additional information on request. You might wish to consider doing this if you are repeatedly asked for certain information, although when disclosing information you should consider commercial sensitivities and any confidentiality clauses in contracts into which you have entered. Where you have a statutory duty to provide information, you should make sure that any relevant contracts explicitly permit disclosure of such information.

If you are asked to disclose information which could be commercially sensitive, remember that you can consider redaction, delayed or partial disclosure as an alternative to rejecting the request.

Some information, for example voting on equities owned by the scheme, can be complex for members to understand. Depending on the request and your disclosure duties, you might wish to contact the member to understand more about what has prompted their request, and whether a summary or some other information, such as an excerpt from the scheme’s annual report may be more accessible.

You can give information by email or via the web where you are satisfied that the member will be able to get access to and store or print the information, and the member has not specifically requested that the information is given as a hard copy (see the administration guide for more information about data security).

Providing information about pooled funds (collective investment schemes)

These requirements apply to the same schemes as the chair’s statement requirements. Therefore, if you need to prepare a chair’s statement you will also need to provide the information set out below when requested as well as updating your scheme’s annual benefit statements to let members know they are entitled to request this information.

If requested by a member or recognised trade union, you must provide – for each arrangement in which the member is invested at the time of the request – the name and International Securities Identification Number (ISIN) for each collective investment scheme in which that arrangement is directly invested.

Pension schemes often invest in collective investment schemes via a unit linked long term contract of insurance. In this case, you must ‘look through’ the insurance contract to the next level of funds in order to provide the member with the above information.

The collective investment scheme information can only be requested once in any six-month period and it must be no more than six months out of date when provided. However, for members who have made changes to their fund investment within the last six months, the date of the information must be no earlier than the date of the most recent change, as it has to reflect the current arrangement.

You may find it helpful to provide members with a fund factsheet although you will still need to specify which funds the member is directly invested in. You must ensure that any fact sheets provide enough information to enable the member to carry out their own enquiries regarding the nature of their investment. If ISIN numbers for the member’s funds are not included in the factsheet, they must be provided separately.

At retirement communications

Our code of practice and the related legislation set out when you will need to communicate with members as they approach retirement, and the information you are required to provide. This includes providing wake-up packs and encouraging members to take up Pension Wise guidance as part of the retirement journey.

You may also want to consider what you communicate to members where legislation doesn’t apply. For instance, some of the information set out in the disclosure regulations may be of use to younger members transferring from your scheme. You may consider communicating earlier than the legal deadlines where this makes sense.

You can decide which retirement options (ie lifetime annuity/scheme pension, flexi-access drawdown, taking a number of cash sums at different stages or taking the entire pot as cash in one go) to offer to members who have a right to flexible benefits (‘affected members’).

If you decide to change your existing retirement options, you should take professional advice as this could also require changes to your scheme’s governing documents. Affected members have an opportunity to transfer their flexible benefits to another arrangement to take advantage of the flexibilities. You should make clear to affected members (in the circumstances and form required by the disclosure regulations):

which retirement options the scheme does and does not offer
that they can access options not offered by the scheme by transferring to one that does

Wake-up packs

Where the disclosure regulations apply, at least four months before an affected member reaches their retirement date you must provide the information set out below in a retirement wake-up pack. If the retirement date is less than four months before the benefits become payable, you must provide the wake-up pack within 20 days of the retirement date. The retirement date should be ‘normal pension age’ in circumstances where there is no retirement date.

You must give the same information where an affected member asks you about taking flexible benefits (or informs you they are considering or have decided what to do with flexible benefits) and they are within four months of normal minimum pension age (currently 55). You must provide the information within two months of the affected member making the request or informing the trustees.

You must also send the wake-up pack information if they meet the ill-health condition.

There are some exemptions to the requirement to send out a wake-up pack. For example, you do not need to send a further wake-up pack if the affected member has previously received one in the last 12 months.

Where there is some form of other contact between trustees and affected members about what they can do with flexible benefits, you should provide the information within 20 days of the initial contact.

The information you give to affected members must include:

A statement of the options available to the affected member under the scheme rules.
A statement that they have the opportunity to transfer flexible benefits to one or more different pension providers.
A statement that different pension providers offer different options for what the affected member can do with the flexible benefits, including the option to select an annuity.
A statement that different options have different features, different rates of payment, different charges and different tax implications.
A copy of the MoneyHelper leaflet Your pension: your choices or a statement that gives materially the same information.
An estimate of the value (or cash equivalent transfer value if relevant) of the affected member’s flexible benefits, the date this was calculated, an explanation that this is not guaranteed and information about any guarantees or features, restrictions or conditions that could affect the value.
A statement that there may be tax implications associated with accessing flexible benefits, that income from a pension is taxable, and that the rate at which income from a pension is taxable depends on the amount of income that the affected member receives from their pension and other sources.

You must also refer the affected member to Pension Wise to enable them to receive guidance on their options to help them make informed decisions. To signpost to Pension Wise, you can either use the standard signposting letter developed by government, plus a separate statement that the affected member should consider independent advice, or develop your own statement. If you use your own communication, this must contain:

a statement that pensions guidance is available to help members understand what they can do with their flexible benefits
a statement that the pensions guidance may be accessed on the internet, by phone or face-to-face
the phone number and website address at which the pensions guidance may be accessed and details of how the member may access the pensions guidance face-to-face
a statement that the pensions guidance is free and impartial
a statement that the member should access the pensions guidance and consider taking independent advice to help them decide which option is most suitable for them

Generally, you don’t need to send the information above if you’ve provided the same information to the affected member within the last 12 months. However, where an affected member is approaching their retirement date, you still need to provide:

the information under point 6 above (even if you have provided information within the last 12 months)
a statement that the member has been given information about the flexible benefits that may be provided to the member, the member’s opportunity to transfer those benefits and the options available under the scheme rules
signposting to Pension Wise

Additionally, affected members must be given the following:

Where they have a right to them, an explanation that they have the right to benefits other than flexible benefits and how they can access information about them.
Where the scheme is not a money purchase scheme, a statement confirming the member’s normal pension age and that the value of their flexible benefits is likely to be lower if they access the benefits before normal pension age. You only need to provide this statement if the member is below normal pension age and doesn’t meet the ill health condition.

Directing members to Pension Wise guidance

From 1 June 2022, you must include the requirements below into your member retirement journeys. They are sometimes referred to as the 'stronger nudge'.

How you include the requirements is up to you, so you retain some flexibility in how you engage with your members. In certain circumstances this is in addition to signposting to Pension Wise in the wake-up pack, in others there will be no requirement to signpost to Pension Wise.

The new requirements do not apply to an application already being processed before 1 June 2022 (this includes communications related to that application that are sent to the member after 1 June 2022). Additionally, where we refer to ‘member’ this also includes ‘beneficiaries of the member’.

When an affected member contacts you about making an application to access their flexible pension benefits or transfer them to another scheme to access their benefits, you should explain that free, impartial guidance on their retirement options is available from Pension Wise. You must also offer to book an appointment.

You must also explain how the affected member can book the appointment themselves if they decline your offer or, having taken reasonable steps, you are unable to arrange a convenient appointment.

You must not proceed with their application until you have confirmation from the member that they have received guidance or opted out from receiving guidance. It is therefore good practice to offer to book a Pension Wise appointment as early as possible in the process. Additionally, trustees may wish to consider encouraging members to take some time to fully consider their decision before confirming that they wish to opt out.

How you implement the requirements to refer members to Pension Wise guidance may differ depending on whether the application or interaction with the member is over the phone, by post or online. You will need to ensure your processes are updated to include the requirement to offer to book a Pension Wise appointment. For example, for postal and online applications, we would expect to see a covering letter or web page confirming the following:

An offer to book a Pension Wise appointment, along with your contact details.
The telephone number for Pension Wise and web address so the affected member can contact them directly for an appointment if they prefer. Please note this number will differ from the number provided in the wake-up pack. See 'Member accepts Pension Wise guidance' below for contact details.
Instructions on how to opt out by completing a separate form/communication in case the affected member does not wish to take up the offer of guidance.

Member accepts Pension Wise guidance

If the affected member accepts your offer to book them an appointment with Pension Wise, you must take reasonable steps to book that appointment at a time and date or of a kind that suits them. Use the online tool to book an appointment for a member.

If this is not possible, or the member declines your offer, you should provide them with the contact details of Pension Wise to make the appointment themselves. Online: www.moneyhelper.org.uk/nudge-public. Telephone: 0800 100 166.

Please note that the telephone number is intended for use by members only. You should make bookings on behalf of members through the online booking tool provided above which has been developed specifically for this purpose.

Member declines Pension Wise guidance

Requirement for a separate opt out

If the affected member declines guidance, you must explain the process for opting out, which involves the member generally confirming in a separate communication with you that they do not wish to take Pension Wise guidance, although certain exemptions apply (see section on 'When a separate opt out is not required'). You must also confirm that you are unable to progress with their application until you have received the opt out.

Affected members who wish to stay in the scheme and access their flexible benefits and do not wish to receive Pension Wise guidance must provide the opt out in a separate communication to you. For example, a further telephone call, an online opt out form through a member portal, or an email or separate form provided with an application. You must not proceed with their application until you have received their opt out notification. However, this does not stop you from providing further information or quotes by post or email, which could also include an opt out form for the member to complete.

If the affected member has not provided you with an opt out notification or confirmation that they have received guidance from Pension Wise, and they contact you again to make an application for access or transfer for access, you must go through the process again. This means you will need to again offer to book them a Pension Wise appointment and confirm that you are unable to progress with their application until they tell you they have received guidance or opted out.

When a separate opt out is not required

While the requirement to offer to book a Pension Wise appointment applies to all affected members who contact you about accessing their flexible benefits, opting out via a separate communication is not required if any of the following apply:

The affected member, or a person authorised to act on their behalf, tells you they have received regulated advice in relation to their application within the past 12 months.
The affected member tells you they have already received guidance from Pension Wise within the past 12 months.
The affected member is making a transfer application to access their flexible benefits. You may wish to include in your transfer application an option for the member to confirm they have attended a Pension Wise appointment, or they want to opt out.
The affected member wishes to access their benefits as a serious ill health lump sum.

Record-keeping

You must keep records of whether a member has either received Pension Wise guidance or opted out. This will also help you to decide whether you need to refer the member to Pension Wise guidance again if they contact you at a later date.

When you do not need to direct members to Pension Wise

When an affected member applies to access their benefits, you will always need to refer them to guidance in the way detailed above.

However, when an affected member applies to transfer their flexible benefits only you are not required to refer them to Pension Wise if one or more of the following apply:

The affected member is under the age of 50.
Receiving flexible benefits is not one of the purposes of their application, for example if they want to transfer to consolidate their pensions.
The affected member, or any person acting on their behalf, tells you they have already been referred to guidance by the trustees or managers of a different scheme and that they have received or opted out of guidance. For example, the receiving scheme offered to book them an appointment.
The affected member is transferring into a contract-based scheme with a Financial Conduct Authority (FCA) regulated provider.

Risk warnings

Once an affected member has confirmed they have received or opted out of Pension Wise guidance and makes contact with you to access their flexible pension benefits, you must also provide generic risk warnings, ie tell the member about the risks associated with the retirement options you offer in your scheme.

Alternatively, you can provide personalised risk warnings, ie ask the member questions to identify any attributes, characteristics, external factors or other variables that increase the risk associated with their decision to take benefits in a certain way. If you choose this option, we consider it best practice to follow the risk warning process set out in the FCA Handbook in COBS 19.7.9. If you provide personalised risk warnings you don’t have to provide generic risk warnings as well.

How you communicate the risk warnings is up to you and should align with your existing retirement communications. You may find the example generic risk warning wording in Appendix 1 helpful when developing your own communications.

If you choose to provide generic risk warnings, they should be provided when you give affected members their application form or another way to access their benefits. You can provide more personalised risk warnings at any time after you have given members a way to access their benefits. In addition, we consider it best practice to provide generic risk warnings on the four main retirement options on transferring to an alternative scheme for members aged 55 or over.

We recommend that you also ask affected members to sign a declaration to confirm that they have read any generic risk warnings. This should help members engage with their retirement choices. How you do this is up to you, but you may find the example declaration wording in Appendix 2 helpful.

You should avoid giving advice to affected members (as opposed to providing information). If, having been provided with the generic risk warnings, an affected member asks further questions about their retirement options and has not received guidance, you can remind them of the guidance available through Pension Wise. You may also recommend the affected member speaks to an FCA-regulated financial adviser for advice (at their own cost), specific to their personal circumstances and their selected retirement option.

Attachment orders

Where a divorce attachment order is held and your scheme offers uncrystallised funds pension lump sums (UFPLS) or flexi access drawdown (FAD), you will need to inform the affected members that an attachment order will be taken into account, and they will need to consider how this might affect the way they choose to take their benefits. Affected members who are intending to transfer to another pension scheme in order to take advantage of the pension freedoms should also be informed of the effect of an attachment order.

Where there is an attachment order, you should consider informing the affected member’s ex-spouse that the affected member may choose to take their benefits in a form that was not necessarily envisaged when the order was put in place. This is so the ex-spouse is aware of, and can prepare for, possible changes to the way they had anticipated the order being implemented, or apply for the order to be varied. You might choose to do this as a general communication to all ex-spouses where an attachment order is in place. Alternatively, you may choose to inform the ex-spouse only if the member applies to take their benefits as an UFPLS or FAD (including how the benefit will be taken), or where a member applies to transfer benefits.

Providing information at retirement – example best practice process

We encourage you to consider the process in the table below when providing information at retirement once the affected member is either:

of an age where they are able to access their retirement benefits and contacts trustees about taking benefits from the scheme
it is at least four months before their retirement date or normal pension age, where there is no retirement date

The process covers the minimum legal requirements and some additional best practice.

The retirement best practice process
Step 1	At least four months before their retirement date or normal pension age, if the affected member hasn’t contacted trustees about taking benefits from the scheme, the trustee / administrator must send out information required by disclosure regulations, including a valuation estimate, details of options offered by the scheme, Your pension: your choices leaflet (or equivalent information) and signposts to Pension Wise guidance. Where an attachment order exists, the trustee informs the member of the effect of the order on the application. If an affected member is old enough to access their retirement benefits and has contacted trustees about taking their benefits, in addition to sending out the information detailed in the paragraph above, the trustee / administrator must offer to book the member a Pension Wise appointment. If the affected member declines, the trustee / administrator must explain how the member can book their own appointment and how to opt out. Trustees may also wish to consider encouraging members at this point to take some time to fully consider their decision before confirming that they wish to opt out. Trustees must not send out an application form for any options offered by the scheme at this stage.
Step 2	The affected member makes further contact to confirm to the trustee / administrator that they have either received Pension Wise guidance, provided a formal opt out or obtained financial advice from an FCA regulated adviser. The affected member confirms that they would like to take their benefits or transfer to another scheme to take their benefits. If the trustees are providing personalised risk warnings, they give them at this point. If the affected member confirms they would like to take their benefits or transfer but have not confirmed they have received Pension Wise guidance or provided an opt out in the required format, carry out the activities in paragraph two of step 1 again.
Step 3	The trustee / administrator sends out generic risk warnings or written record of personalised risk warnings and an application form for any options offered by the scheme and/or transfer form, along with request for any information needed to pay or transfer the benefits (eg bank details, proof of ID, details of receiving scheme). Alongside the risk warnings, there must be a statement encouraging them to read the risk warnings. The application form should incorporate a request for the member to confirm whether they have read the risk warnings. Where an attachment orders exists and the member has applied to take their benefits in the form of UFPLS or FAD, the trustee informs the ex-spouse of the application, or of an intended transfer.
Step 4	Affected member returns form.
Step 5	Trustee / administrator processes request using their normal procedure.

Post-retirement communications

Where your scheme offers retirement options other than using pension savings to buy a lifetime annuity, eg flexi-access drawdown, you need to consider what information you provide to members to continue supporting them to make good decisions.

As a minimum you should communicate information about:

investment – what fund(s) the member is invested in and how they have performed
withdrawal levels – how much the member has withdrawn from their pension over the last year
what level of income their fund could provide in the future

We also encourage you to re-signpost to MoneyHelper whenever you communicate with members who are taking benefits from your scheme.

Pension scams

Pension scams are on the increase, and trustees play a crucial role in helping members protect their retirement savings.

Scammers use a range of tactics to tempt members to invest their pension pot with them, including directing them to transfer into small (often one or two member) occupational schemes to avoid scrutiny from regulators.

Tell your members to check the facts before they make an irreversible decision.

You can help members to protect themselves from becoming victims of a pension scam by giving them regular, clear information about how to spot a scam.

You should include our pension scams leaflet (PDF, 257kb, 2 pages) when you send annual statements to members and to anyone who requests a transfer.

Master trusts (relevant multi-employer schemes)

Master trusts may have additional considerations when communicating with members or potential members.

If you are a trustee of a master trust which operates on a commercial basis, you will need to consider whether your communications would fall under the FCA’s financial promotion rules. If they do, you’ll need to ensure that you either comply or are able to use a relevant exemption. You may want to consider getting professional advice if you think this is a possibility and are not familiar with the FCA’s requirements.

If your master trust offers decumulation options directly to new members, we consider it good practice to follow the risk warning process as set out in the FCA Handbook in COBS 19.7 – or, as a minimum, provide generic risk warnings on the options your scheme offers.

Annual chair's statement

Every year you have to confirm in the chair's statement how the scheme meets certain governance standards. Though the chair is responsible for signing the statement, the trustee board as a whole needs to ensure that the relevant standards are met.

Who needs to prepare a chair’s statement?

Some schemes do not have to produce a chair’s statement and are not legally required to meet the governance standards on which it reports. In particular, schemes where the only DC benefits provided are attributable to AVCs do not need to produce a statement. In addition other types of scheme to which exemptions apply are:

relevant small schemes
executive pension schemes
public service pension schemes
schemes which are not tax registered, provide only death benefits, or is not established in the UK and has no trustees resident in the UK
single member schemes

You should consider taking advice on whether your scheme is exempt if your scheme falls into one of these categories.

Earmarked schemes (a collection of individual arrangements set up under a single trust, where the benefits for each member are secured by separate insurance policies or an identifiable interest in part of a group policy) are not exempt from the requirement to prepare a chair’s statement, and to include it in their annual report (though they may be exempt from the requirement to produce audited accounts).

Schemes in wind-up

If your scheme is in wind-up at the point of the scheme year end, you’ll need to decide whether it is likely to be completed within seven months of the year end. If it becomes apparent that the wind-up of the scheme will not be completed within seven months of the scheme year end you will need to prepare a chair’s statement before the seven month period has elapsed. If you fail to prepare a chair’s statement and your scheme is still winding up when you complete your scheme return following the end of the seven month period, you’ll need to declare that a chair’s statement had not been produced. Failure to produce a statement within seven months of the scheme year end attracts an automatic penalty of between £500 and £2,000.

The above is also true of a scheme that is likely to cease to be a relevant scheme (as defined in the regulations) prior to the end of the seven month period. For example where a scheme with a DB and a DC section has wound up the DC section within the seven month period and only the DB section remains.

DC underpins

If your scheme provides DB benefits with a money purchase underpin, you will only need to produce a chair’s statement where the underpin actually applies in relation to at least one member. For example:

if a member accesses benefits from the scheme, and you calculate that the underpin applies so provide benefits on a money purchase basis
if a valuation reveals that the underpin applies to certain active or deferred members, such that their entitlement falls to be calculated on a money purchase basis

In other circumstances, for example where there is no reasonable expectation that the money purchase underpin will apply in practice, you do not need to produce a chair’s statement. For the purposes of the chair’s statement requirement, you will not always need to assess on an annual basis whether the underpin bites for any particular member for whom retirement benefits are not in payment.

Even if you are exempt from the legal requirement, you might wish to consider whether providing information to members covering similar areas to those required in a chair’s statement would be appropriate and useful.

Where your scheme is required to prepare a chair’s statement, you’ll have to declare that you have produced this as part of your scheme return.

What should be in the chair’s statement?

The chair’s statement is the document in which you describe and explain the actions you have taken to comply with certain obligations. You should take steps to ensure you are complying with the standards well in advance of your annual report and accounts so that you are able to produce the chair’s statement when the time comes.

In summary, the broad areas the chair’s statement covers are:

the default arrangement and its asset allocation and governance
the processing of core financial transactions
disclosure of net investment returns
disclosure of costs and charges (including transaction costs) relating to the default arrangement and self-selected funds and their long-term effect on returns
trustee knowledge and understanding
the trustee board and member representation (for master trusts only)
the assessment of value for members: this differs depending on the size of the scheme (see below)

The statement should explain the process and considerations of trustees with further information to be available on request (we may ask you to produce it during an investigation relating to your scheme).

The chair’s statement is currently the only way by which members have a legal right to obtain information on costs and charges so you should make sure you write the statement in plain English. You must also make the following information in the statement publicly available on a website, where it can be accessed free of charge:

A copy of the statement of investment principles for the default arrangements (default SIP).
A description of any review of that statement in the last scheme year and any resulting changes. If there was no review in that year, publish the date of the last review.
The return on investment net of charges (including transaction costs) for every default arrangement and every fund that members who have made a selection were invested in during the scheme year.
The level(s) of charges and (as far as you are able) transaction costs paid by members for each default arrangement and every fund that members who have made a selection were invested in during the scheme year.
A statement on any unavailable transaction costs details and steps being taken to obtain this information in future.
For trustees of schemes with £100 million and over of assets under management, an explanation of your assessment of the extent to which member-borne costs and charges, including any performance-based fees, and transaction costs represent good value for members.
Trustees of schemes with under £100 million of assets under management that have been operating for at least three years must provide an explanation of the more detailed value for members assessment that they have carried out. For more information, read the statutory guidance on value for members assessments on GOV.UK. If you have notified us that you are in the process of winding up, these requirements do not apply and you must instead publish an explanation of your assessment of the extent to which member-borne costs and charges, including any performance-based fees, and transaction costs represent good value for members along with an explanation that this is because the scheme is winding up.
An illustration of the compounding effect of costs and charges on the value of benefits.

Annual benefit statements must inform members that the information above is available, where it’s published and how to access it, and the circumstances in which this information will be provided on request in hard copy format. We also encourage you to publish the full chair’s statement so members have access to the information without having to make individual requests. When publishing the full chair’s statement make sure that you include all the required information in the main body of the statement. You should only provide links to information that regulations permit to be ‘included’ – ie the default SIP and any cumulative illustrations. You might also consider including the statement, or a summary of it, with the annual benefit statement.

There is no set format, or standard template that you must use for your chair’s statement. However, various advisory firms and organisations have produced templates that you may wish to use as a starting point.

The exact content will depend on your individual scheme, and the format you choose should depend on your own scheme’s chosen communication style and assessment of what would best suit the needs of your members. You can include more information in the statement than what is required by the law if you wish.

You should write the statement so that it provides a meaningful narrative of how, and the extent to which, the governance standards have been complied with. This means not only stating whether or not compliance has been achieved, but including an explanation of the measures that have been taken to achieve compliance and how you have reached the conclusion that they are compliant, bearing in mind that members are the target audience.

As well as looking at available templates, you could also look at statements that have been produced by other schemes. Parts of these should be publicly available online and some schemes may have chosen to publish the whole of their chair’s statement. You may also find it useful to look at statements that are produced by the Independent Governance Committees (IGCs) of providers of contract-based pension schemes, which are available online. Though the requirements of what must be covered in those statements are not identical to the requirements for the chair’s statement, there are a number of similarities.

You should make sure that anything you write in the chair’s statement is backed up by documented evidence, though you don’t need to append this evidence to the statement. There must be an audit trail to enable sign off and to demonstrate a proper process.

Appendix 1: Generic risk warning example text

You can get a guaranteed income for life

A lifelong, regular income (also known as a lifetime annuity) provides you with a guarantee that the money will last as long as you live. You can also choose a guaranteed income that increases with inflation and/or continues to provide an income for a dependant. A quarter of your pension pot can be taken tax-free and any other withdrawals will be taxable.

People who have a medical condition, are in poor health, smoke or are overweight, may be able to get a significantly higher income through taking an ‘enhanced annuity’. These people should consider opting into health and lifestyle questions – and it’s important to answer these questions honestly.

People considering this option should think about whether to provide an income for a partner or another dependant on death and therefore whether to purchase a single life or joint life annuity. Compare what, if anything, we offer to spouses or dependants against what’s offered by another scheme or provider.

‘Level’ annuities provide a higher income to start with than annuities that increase but the payments will then stay the same for life. This means that the purchasing power of the annuity income will reduce over time, due to inflation.

You don’t have to take any annuity or other pension we may offer– and different providers might pay a higher income. So it’s important to shop around. Remember that annuity purchases are a lifetime commitment, so there’s no rush to make a final decision.

You can get a flexible retirement income (flexi-access drawdown)

You can leave your money in your pension pot and take an income from it. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. A quarter of your pension pot can be taken tax-free and any other withdrawals will be taxable.

As with every investment, there’s the risk that the value of a pension pot can go up and down. People considering this option should think about how much they take out every year and how long their money needs to last. If too much money is taken too quickly, the available retirement income could fall drastically or even run out, especially if stock markets fall.

Charges can reduce the money received. Check whether there are any charges or other reductions to a pension pot when a lump sum is withdrawn. Providers and schemes may also make ongoing charges on any undrawn money, so it’s important to consider the impact of these charges. And if you plan to take the cash to invest somewhere else, check what the charges are before you cash in your pension.

Different schemes and providers offer different types of flexible retirement income. Check what kind of drawdown is being offered. Some might have products where part of your income is guaranteed but charges and conditions will apply. People considering a flexible retirement income should consider shopping around – an FCA-regulated financial adviser will be able to help with this.

You can take your pension pot as a number of lump sums

You can leave your money in your pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, a quarter of it is tax-free and the rest will be taxable.

People considering this option should consider their own personal tax circumstances, and the impact of taking a taxable lump sum on the tax they pay – including the possibility that they may have to pay a higher rate of tax than normal depending on the amount withdrawn. As with every investment, there’s the risk that the value of a pension pot can go up and down. People considering this option should think about how much they take out every year and how long their money needs to last.

Charges can reduce the money received. Check whether there are any charges or other reductions to the pension pot when a lump sum is withdrawn. Charges will continue to be taken from any money left in the pension pot, so it’s important to consider the impact of these charges. And if you plan to take the cash to invest somewhere else, check what the charges are before you cash in your pension.

Taking cash withdrawals may have implications for people with debt or who may be entitled to means-tested benefits. People who are concerned about this aspect can contact the Citizens Advice Bureau or MoneyHelper.

You can take your whole pot as cash in one go

You can take the whole amount as a single lump sum. A quarter of your pension pot can be taken tax-free – the rest will be taxable. You do not need to stop working to take this option, but you need to plan how you will provide an income when you stop working.

On average, people aged 55 today will live to their mid-to-late 80s. It’s important not to underestimate your own life expectancy. People considering this option should think about how to use the money to provide an income throughout retirement.

There will be tax implications if an entire pension pot is taken as cash in one go. These will depend on an individual’s personal circumstances. In most cases there will be a tax-free amount available (normally 25%). People considering this option should consider their own personal tax circumstances, and the impact of taking a taxable lump sum on the tax they pay – including the possibility that they may have to pay a higher rate of tax than normal. Some providers and schemes may have charges for taking a pension pot as cash, so check this before committing. And if you plan to take the cash to invest somewhere else, check what the charges are before you cash in your pension.

You can choose more than one option and you can mix them

You can also choose to take your pension using a combination of some or all of the options over time or over your total pot. If you have more than one pot, you can use the different options for each pot. Some pension providers or advisers can offer you an option that combines a guaranteed income for life with a flexible income.

You can keep your retirement savings where they are

You can delay taking money from your pension pot. Reaching age 55 or the age you agreed with your pension provider to retire is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

Appendix 2: Example declaration wording

Example of the type of declarations you may want to include in your retirement documentation for members to complete

This does not replace the requirement to signpost to Pension Wise. These should be adapted as you see fit, to align with your existing retirement documentation and the specific circumstances of your scheme. We suggest the declarations are included in other documents that members have to return in order to get their benefits paid or transferred (ie the final retirement options form or request for bank account details or proof of ID), to ensure they engage with the declarations.

Retirement options declaration Please tick the relevant box	Yes	No
I confirm that I have received guidance from Pension Wise.
I confirm that I wish to opt out of receiving guidance from Pension Wise.

Retirement options declaration Please tick the relevant box	Yes	No
I confirm that I have received advice from an FCA-regulated financial adviser.

Note: If you have not received the Pension Wise guidance or financial advice from an FCA-regulated financial adviser, we strongly suggest that you do this before proceeding.

Retirement options declaration Please tick the relevant box	Yes	No
I confirm that I have read the risk warnings in this document and am happy to proceed with taking my retirement benefits or taking a transfer to another arrangement to access my retirement benefits.

Communicating with DC scheme members