• The Department for Work and Pensions (DWP) has unveiled proposals designed to simplify the retirement information automatic enrolment savers receive each year (Simpler annual benefit statements (publishing.service.gov.uk))
• The Government is also considering the merits of creating a ‘statements season’ when annual retirement communications would be sent to members
• Stripping back the volume and complexity of the information members receive is vital to boosting engagement
• Government must also acknowledge its role in building a simpler pensions framework for savers
Tom Selby, senior analyst at AJ Bell, comments:
“Improving engagement is the next big retirement policy challenge following the successful introduction of automatic enrolment.
“With millions now setting money aside in a pension for the first time, we now need to make sure this new generation of retirement savers understand what automatic enrolment contributions will deliver and whether that is likely to be enough to meet their expectations.
“In most cases, particularly where contributions are set at the minimum level of 8%, they will not.
“Making sure the information people receive on their pension is useful, simple and readable is vital to improving understanding, so the DWP’s ‘simpler statements’ initiative is a step in the right direction on that front.
“Complexity is the enemy of good communication, whether during the saving phase or when someone is drawing an income from their retirement pot. Ensuring all communication requirements are as straightforward as they can possibly be and consistent across private pensions as well as auto-enrolment schemes should now be a priority for Government, regulators and pension providers.
“The idea of creating a ‘statements season’ could also help encourage more structured financial education and is certainly worth more detailed analysis and consumer testing.”
Simplifying pensions rules
“While the Government is understandably focusing on the information providers send out to members, it should also acknowledge the role it has played in creating mind-bending complexity in the pensions system.
“From the old state pension to the tapered annual allowance, the lifetime allowance and the money purchase annual allowance, there are countless examples of unwelcome and unnecessarily complicated rules created by the Government.
“Although some of these only affect a small proportion of savers, they need to be explained to everyone.
“As the wider pensions industry strives to make life simpler for savers, the Government should also consider its role in ensuring people feels confident engaging with their retirement pot.”
