We move on now to an area that is of considerable public interest, which is the guff you get from your pension scheme. I use the technical legal jargon at this point. We all know that people get telephone directories’ worth of paperwork from their pension schemes. This is designed to be informative and so often it is not. I have here the Financial Reporting Council’s guidance on what are called SMPIs—statutory money purchase illustrations—and there is a lot of guidance on what is included and how it should be done. I have here—I had better put my thumb over the company—an annual pension statement, which runs to 13 pages. There are fund values, lows, mids and highs, a long list of management charges, frequently asked questions, your attitude to risk, financial education, growth rate assumptions, other assumptions and, bizarrely, two pages intentionally left blank. Imagine, in the world of small pots before we sort out auto-transfers, getting perhaps 11 or 12 of these over your working life. I suspect nobody reads any of them. We need to move to transparent, straightforward communication of pensions information.
There is some suggestion that it is the Government’s fault. Many things are the Government’s fault, but this is not. Pension schemes are well able, if they wish, to send simple, clear information. I have here a two-page version of what we think is enough to satisfy the law. Therefore, we are very keen for providers not to gold-plate what Government require of them, but just to give people simple, clear information. We are working with the industry on that, and I hope we are making some progress.
Production of these statutory—and they are statutory—money purchase illustrations is overseen by the Financial Reporting Council. Clause 41 relates to the activities of that body. To explain more precisely what the clause does, it amends section 16 of the Companies (Audit, Investigations and Community Enterprise) Act 2004 so that it is explicit that a body may receive a grant for the production of guidance used in pension illustrations. This amendment ensures that the body may benefit from the exemption from liability for damages in section 18, which applies in relation to “section 16(2) activities”. That also enables grants to be made to the body, even if it does not carry out any of the other activities listed in section 16(2).
Why are we doing this? At present, the relevant body is the Financial Reporting Council—the FRC. It produces guidance; a technical memorandum: TM1. The clause makes clear that the FRC (or any other body) may benefit from the exemption from liability for damages in relation to this activity. We are protecting the FRC, to make sure that, if in good faith they produce guidance for schemes, they are not subject to damages as a result. It makes the position consistent with the approach for the other things that the FRC does on accounting and actuarial matters. It will enable the FRC to exercise its statutory functions, limiting the risk to its own financial position and to its becoming involved in disputes between pension providers and pension scheme members over the content of illustrations.
While we assess the risk of claims being made against the FRC to be low, we still feel it is important to put the matter beyond doubt, especially with the expected increase in volumes of SMPIs. Let us bear in mind that there will be far more of these dropping through letter boxes in the coming years with automatic enrolment. Our colleagues at the FRC do an important job and we wanted to make their legal position clear. That is the purpose of the clause.