17 December 2018
For some time now our Future Pensioner Hub has been a platform for calls to make pensions more accessible and easier for Future Pensioners to understand and engage with, so the recent announcement of the launch of the new simplified annual pensions statement is music to the ears, says Laura Myers.
Clear, concise, consistent
Essentially, the simplified annual statement creates a two-page template which sets out clearly and in plain English the key information that savers want and need to know about their pensions, namely:
- How much money is currently in their pension plan;
- How much it is likely to be worth on retirement; and
- Simple suggestions of what they could do to make their pot worth more.
Though it’s likely that providers will want to tailor the look and feel of the document to fit their own corporate branding and specific requirements, the idea is that generally they will all deliver the same easily digestible essential information in a consistent format. At first, this might not sound revolutionary, but when you consider that people are very likely to be getting several statements, for several pots, from several different providers, all set out differently and using different language, you can quickly see how it becomes inmpenetrable for many savers. So rather than being engaged, members are overwhelmed and confused. This template should start to overcome this engagement hurdle.
The problem is that providers don’t have to use this template. This is about defining a “best practice” industry standard rather than being prescriptive, so it remains to be seen to what extent the new template will be generally adopted.
Whatever form it takes, I believe providers should adopt this new tool and focus on simplification – an easy way to kick things off with an eye on simplicity would be for the industry to encourage providers to stick to a two-page (max) statement.
The early signs are good: this is the result of a cross-industry initiative and it’s already got widespread backing from several major pension providers as well as regulators and the Pensions & Lifetime Savings Association (PLSA).
A push to get off the ground
However, if this is to work, it needs real buy-in right across the board – and sooner rather than later while the momentum of the launch is still behind it.
Demonstrating demand is a good way to achieve this. If all DC scheme trustees and governance groups question their providers about whether and when they are planning to adopt it, then providers will see a clear level of interest and it’s likely more of them will do so. At the very least, if they aren’t going to, they should be able to offer a good explanation as to why your statement can’t be delivered in a clearer and more digestible manner.
Such transparency in annual statements could make a major difference to the way people see, and more importantly, save for their pensions – and that’s something we will all want to promote. We might just need to give our providers that little push for this proposal to take off universally.