You know you have a problem when the Minister for Pensions and Financial Inclusion, Guy Opperman says:
‘For too long pensions have been shrouded in complexity and technical jargon, limiting people’s understanding of their savings and hampering their retirement planning.’
To be fair, I completely agree with him and make him absolutely correct!
Historically pension statements have been issued on an annual basis, are usually 8-10 pages long and may potentially grab the reader’s attention for the first 2 pages, possibly 3 at a stretch. The reader is likely to simply file this statement into their dusty old pension file where it will sit with the last 5 years’ worth of statements. Most lay people tend to want to know 3 things:
- How much money is in my pension pot?
- How much money will this give me when I retire?
- What can I do to improve these figures?
Recently, pension providers have been taking steps to make their pension statements more engaging such as including colourful pie and bar charts and also issuing them online to make them more accessible but is the message getting across to the consumer?
The Department for Work and Pensions (DWP) has announced proposals that will mean that annual pension statements for workplace pensions will have to be condensed to a maximum of two pages.
The DWP proposals will require pension providers to provide pension statements and structure them in such a way that draws members’ attention to the three key areas mentioned above.
The initial focus will be on defined contribution schemes used for Automatic Enrolment, with a view to later improving consistency across all types of pension schemes.
Simpler statements will include a line on costs and charges and a clear signpost for a more detailed assessment of this information elsewhere to help members see what they have paid for their pension.
Guy Opperman has also said:
‘Simple statements will usher in a new standard for how schemes communicate with their members – vastly improving people’s understanding and engagement with their pensions.’
With more people saving for their retirement than ever before thanks to Automatic Enrolment, it is vital they can understand what’s going on with their hard-earned money and actively plan for their future.
Simpler pension statements support the department’s ambition to make information about pension saving more accessible to consumers, running parallel to the department’s championing of the use of dashboards, an innovation that will allow savers’ pension information to be accessed on digital devices at any time they choose. Further work to encourage and drive the consolidation of small pots will also lead to better outcomes for pension scheme members.’
If any of your employees are having any difficulty in understanding their pension statements in their current form, then please do not hesitate to direct them to our experienced team at Wingate on 01883 332260 or at firstname.lastname@example.org who will be able to help them make sense of what they have and how it works.
Ref: https://www.gov.uk/government/news/simple-statements-boost-for-pension-planning 19th October 2020