Section 50 of the Pensions Act 1995 requires that the trustees and managers of occupational pension scheme ("trustees") have in place and maintain internal dispute resolution procedures to facilitate the resolution of disputes between them and any person who has an interest in the scheme (e.g. a member of the scheme, a widow, a surviving dependant, etc.).
The requirements were amended with effect from 6 April and give trustees the flexibility to adopt a single-stage procedure, rather than the two-stage process that was required in the past. However, trustees are not obliged to change their two-stage arrangements to a single-stage process.
In addition to this greater flexibility, the amended legislation requires that trustees consider and respond to applications within "reasonable periods", rather than within stipulated timeframes.
The Pensions Regulator has issued guidance noting that it will ordinarily consider a reasonable period for making a determination to be not longer than four months and a reasonable period for informing the applicant of the determination to be not longer than 15 working days. Where there is a two-stage process, these reasonable periods apply separately to each stage.
Trustees can adopt or retain shorter time limits, which will likely be a feature of their scheme's current procedures.
Where it is possible to respond sooner than the reasonable or shorter time periods chosen, the Regulator expects trustees not to delay communicating the determination until the end of the relevant period.
There will be instances where it is not possible to meet the specified time periods. The Regulator recognises this and, in such circumstances, trustees must be satisfied that the time taken to provide a determination is appropriate and that the necessary action has been taken to make and issue the determination within the relevant periods.
Regarding the timing of applications, arrangements must specify that a person who has an interest in the scheme must make any application not later than the end of a 'specified reasonable period', which the Regulator has noted will be six months from the date on which that person ceased, or claims he ceased to be, a person with an interest in the scheme.
Finally, as part of their dispute resolution procedures, trustees are still required to inform applicants of the existence of The Pensions Advisory Service (TPAS) and the Pensions Ombudsman. In relation to TPAS, trustees now require to highlight its existence and to provide its contact details at the start of the process rather than when the determination is issued. When doing so, they should inform the applicant that it can assist members and other beneficiaries with pension disputes.
Depending on the procedures that they have in place, it is likely that trustees will need to review and revise them to reflect the revised requirements (even if they do not want to adopt a single-stage process) and a review of the relevant processes and papers is recommended.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.