PENSIONS Citation, commencement and interpretation 1 1 These Regulations, may be cited as the Personal Pension Schemes (Advertisements) Regulations 1990 and shall come into force on 27th June 1990, except regulation 3 which shall come into force on 1st October 1990. 2 In these Regulations “ Act ” means the Pension Schemes Act 1993 ; “ advertisement ” includes every form of advertising, whether in a publication, by the display of notices, signs, labels or showcards, by means of circulars, catalogues, price lists or other documents, by an exhibition of pictures or photographic or cinematographic films, by way of sound broadcasting or television, by the distribution of recordings, or in any other manner; and references to the issue of an advertisement shall be construed accordingly. “ explicit charges ” means those charges made by the Scheme if any, the nature and amount (whether fixed or variable) of which are ascertainable at the time application for membership is made; “ issue ” in relation to an advertisement includes any form of issue or publication whether to the public at large or to individuals or groups of individuals or to any employees, but does not include the issuing or publishing of an advertisement to an agent or professional adviser of the issuer in their capacity as such. “ LAUTRO Rules ” means the Lautro Rules 1988 ; “ Off the page advertisement ” means an advertisement which contains– an offer by a deposit-based scheme or the provider thereof to admit to membership a person who responds to the advertisement; or an invitation to a person to respond to the advertisement by making an offer to a deposit-based scheme or the provider thereof to become a member of that scheme; “ period ” means the period from the date of issue of an advertisement to the date when a pension under the scheme is assumed to become payable for the purpose of a projection; “ projection ” means an illustration of the amount of any future benefit payable under a deposit-based scheme, being benefit the amount of which is not ascertainable under the rules of the scheme when the calculation is made; “ relevant investment ” means the investment into which contributions to be made to a deposit-based scheme by or on behalf of a prospective member will be made; and “ standard expenses ” means any expenses of a scheme which are recoverable out of contributions made to the scheme by or on behalf of a member, the amount of which cannot be ascertained at the time of admission to membership. Scope of the Regulations 2 These Regulations apply in respect of any personal pension scheme which takes the form specified in regulation 2(1)(c) of the Personal Pension Schemes (Appropriate Schemes) Regulations 1988 (investment of contributions in an interest-bearing account), and in these Regulations such a scheme is referred to as a “ deposit-based scheme ”. Projections 3 1 Any projection contained in an advertisement for a deposit-based scheme shall contain or be accompanied by a statement in the following terms– “ The figures quoted in this projection of future benefits are illustrations only. They do not represent the upper and lower limits of the amounts of the benefits. What is actually payable will depend on the future movement of market forces, which can go down as well as up, and the effect of charges applicable to the Scheme. These illustrations should not be used as a basis for comparing similar contracts issued by other pension providers. ” . 2 In so far as a projection contained in an adverstisement for a deposit-based scheme relates to contributions which will give rise to protected rights under the scheme, then– a if the projection is in respect of a period of not more than 5 years it– i shall be prepared on the basis that the only contributions to be made to the scheme are minimum contributions under section 43 of the Act in respect of the tax year in which the projection is prepared and, if the rate of the rebate percentage (within the meaning of paragraph (2A) below ) is known, the next following tax year, which shall be treated as a single premium; and ii shall assume a rate of interest not exceeding that payable in respect of the relevant investment on the day the projection is made; and iii shall allow for a deduction from the contributions to be invested in respect of any explicit charges; and iv any annuity derived from the fund obtained in accordance with sub-paragraphs (i) and (ii) above shall be obtained in accordance with paragraph 3(3) of Part I of Schedule 4 to the LAUTRO Rules; b if the projection is in respect of a period exceeding 5 years it– i shall be prepared on the basis that the only contributions to be made to the scheme are minimum contributions under section 43 of the Act in respect of the tax year in which the projection is prepared and, if the rate of the rebate percentage (within the meaning of paragraph (2A) below ) is known, the next following tax year, which shall be treated as a single premium; and ii shall assume a real rate of interest (after allowing for increases in excess of national average earnings) of plus one half per cent and minus one half per cent (both compound); and iii where there are explicit charges, shall allow for a deduction of those charges from the contributions to be invested; iv shall, unless the projection allows for explicit charges, allow for a deduction from the contributions to be invested of one per cent in respect of standard expenses; and v any annuity derived from the fund obtained in accordance with sub-paragraphs (i) to (iii) above shall be obtained in accordance with paragraph 2(6) of Part I of Schedule 4 to the LAUTRO Rules. 2A In this paragraph “rebate percentage” means the percentage arrived at by adding the percentage mentioned in paragraph (a) of section 41(1) of the Act to that mentioned in paragraph (b) of that section. 3 In so far as a projection contained in an advertisement for a deposit-based scheme relates to contributions which will not give rise to protected rights under the scheme, then– a if the projection is in respect of a period of not more than 5 years it– i shall assume a rate of interest not exceeding that payable in respect of the relevant investment on the day the projection is made; and ii where there are explicit charges, shall allow for a deduction of those charges from the contributions to be invested; and iii any annuity derived from the fund obtained in accordance with sub-paragraphs (i) and (ii) above shall, if the projection is in respect of a period of more than one year, be obtained in accordance with paragraph 3(3) of Part I of Schedule 4 to the LAUTRO Rules; and iv shall contain or be accompanied by a statement showing the effect on the real value of the scheme benefits if retail prices in Great Britain were to increase at the rates of 4 per cent compound, 7 per cent compound and 10 per cent compound; and b if the projection is in respect of a period exceeding 5 years it– i shall assume an interest rate of 8 per cent and 11 per cent (both compound); ii shall allow for a deduction from the contributions to be invested of one per cent in respect of standard expenses; and iii where there are explicit charges, shall allow for a deduction of those charges from the contributions to be invested; and iv shall contain or be accompanied by a statement showing the effect on the real value of the scheme benefits if retail prices in Great Britain were to increase at the rates of 4 per cent compound, 7 per cent compound and 10 per cent compound; and v any retirement fund and annuity shall be obtained in accordance with paragraph 2(5) of Part I of Schedule 4 to the LAUTRO Rules. Off the page advertisements 4 An off the page advertisement for a deposit-based Scheme must include the following information– a where contributions are payable periodically, whether there are any minimum or maximum amounts of such a contribution and, if so, what those amounts are; b how and where full details of the Scheme may be obtained; and c the information specified in paragraphs 1 and 4 to 8 of Schedule 2 to the Personal Pension Schemes (Appropriate Schemes) Regulations 1988 but with the modification that in paragraph 5 of that Schedule the reference to the time when the notice is served shall be read as a reference to the time when the advertisement is issued. Form and content of advertisements 5 An advertisement for a deposit-based scheme shall not, in respect of its design, format or content,– a convey any information which is false or misleading; b contain any statement of fact which the issuer does not at the time the advertisement is issued have reasonable grounds for believing will continue to be true for so long as it remains relevant to the subject-matter of the advertisement; c make any comparison with any other personal pension scheme or occupational pension scheme or the state earnings related pension scheme which is unfair or misleading; d make any statement about the past performance of the scheme unless it also contains a warning that such information is not necessarily a guide to future performance; or e contain, whether expressly or by implication, any statement to the effect that the advertisement has been approved by any Government department or by the Occupational Pensions Board. Offences and penalties 6 Any person who issues or causes to be issued in Great Britain an advertisement for a deposit-based scheme which he knows contravenes any provision of these Regulations or being reckless as to whether there is such a contravention shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. Signed by authority of the Secretary of State for Social Security. Nicholas Scott Minister of State, Department of Social Security