Workplace pension statements to be condensed to two pages
The move follows a consultation which ran between 1 November and 20 December 2019.
The consultation sought views and evidence on options for the policy approach to the content and presentation of information provided to members through their annual workplace pension benefit statements.
The government has now published its response to the consultation. It says the existing statements are “lengthy, inaccessible and inconsistent in design and content”.
Plans to reform the statements centre around creating a standardised, two-page annual benefits statements for workplace pensions.
Previously the government planned to include costs and charges in members’ annual statements, but it has now backtracked on these plans after a backlash from the pensions industry.
Pensions experts had raised concerns that it would be challenging to present information on charges clearly in a two-page statement.
Instead simpler statements will “signpost” readers to detailed information on investments and charges.
A DC pension scheme provides a retirement income that is based on the amount of money paid in and investment growth of this money.
The new statements will include three key pieces of information:
- how much money is in your pension pot
- how much money this could grow to by the time you retire
- ways to boost the amount you have to live on in retirement
Tom Selby, senior analyst at AJ Bell, said: “Sending people big fat envelopes packed with impenetrable jargon – as has too often been the approach in the past – is a bad way to inform and engage people with their retirement savings.
“The government’s focus on this area has the potential to act as a catalyst for much-needed simplification and create a platform for the reinvigoration of pension communications more generally.”
Yvonne Braun, director of long-term savings and protection at the Association of British Insurers, said: “Simplicity and ease are important when communicating pensions information, which is why pension providers keep innovating for customers, both digitally and in paper communications.
“We look forward to seeing the detailed proposals. It is important that the changes are consistent across regulatory regimes, future-proof, in particular in terms of joining up with pensions dashboards, and that they have a realistic implementation timeline.”
The government’s consultation response also raised the idea of whether a ‘”statement season” might support engagement through helping to generate a national conversation around pension saving.
Steven Cameron, pensions director at Aegon, said: “To support the government’s preference for a ‘statement season’, it’s even more important that schemes and providers advance digital statements.
“A digital approach also allows individuals who want more information, such as on charges, to ‘click through’, without overloading the two page statements. While charge levels are important, individual members in workplace pensions can’t influence these, which is where Independent Governance Committees and Trustee Boards have a key role to play in challenging value for money.”