Since the dawn of pension freedoms last year, a number of new and complicated terms have been added to describe the options for savers and retirees.

But now, the Association of British Insurers (ABI) has released a consultation to introduce a new guide to pensions language to standardise the terms so individuals can understand and compare products more easily.

It comes as research by the Money Advice Service and ComRes found terms such as flexi-access drawdown and uncrystallised pension funds lump sum are too confusing and should be avoided.

But in contrast, some terms such as ‘taking cash’ or ‘chunks’ from your pension are seen as too informal.

Instead, those approaching retirement want to see information about tax and fees upfront and they want a pensions language to encourage them to take responsibility for their finances, but it should not be “alarmist”.

Pensions Language Steering Group

The ABI has formed a Pensions Language Steering Group, involving industry, government, regulators and consumer groups, to develop simple and consistent language and it’s also consulting on what should and shouldn’t be included.

So far, the proposals include:

• You can keep your pension savings where they are
• You can take your whole pension pot in one go
• You can take your pension pot as a number of lump sums
• You can get a flexible retirement income
• You can get a guaranteed income for life
• You can choose more than one option and you can mix them.

ABI director of policy, long term savings and protection, Dr Yvonne Braun, said: “The industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them for their retirement. Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it’s important that we make these options as clear and comparable as possible.”

Nathan Long , senior pension analyst at Hargreaves Lansdown said a new guide to pension language could hopefully consign the use of terms like UFPLS, decumulation and benefit crystallisation event to the scrap heap.

“Focusing on improving consumer understanding will help people make confident, appropriate and informed decisions when it comes to choosing what to do when drawing from their pension. Using words everyone can understand, even if they don’t have a PHD in pensions, is crucial to improving understanding and will also help to build trust with pension providers.”

The consultation runs until 19 June.