Pensions and financial inclusion minister Guy Opperman has proposed regulations to introduce simpler workplace benefit statements so that members can better understand them.
The draft rules under consultation, open from 17 May until 29 June, would introduce requirements in April 2022 for the length and format of annual statements sent to certain defined contribution (DC) schemes used for auto-enrolment (AE).
Following its 2017 review of AE, the government consulted in 2019 on how annual benefit statements could be reformed and made simpler, shorter and more consistent. In October 2020, the government said it would mandate an approach to simpler statements, using a two-page statement template developed during the 2017 review, as the starting point in considering the length, content and design.
Today’s move has been welcomed by many in the pension industry, including Darren Philp, director of policy at Smart Pension, who called it a positive step to simplify pension communications and start helping people to understand their pensions.
“Pensions communications are too often jargon-led and too detailed, and this initiative, which pares back information to what’s necessary should make it easier for pension savers,” he said. “This is an important initiative and, along with the pension dashboard, has the potential to pave the way for increasing understanding and engagement.”
Boring Money chief executive Holly Mackay said it was a step in the right direction and “there is no longer any excuse to send out a bland 20-page document full of meaningless, dull gobbledygook”.
However, some were more sceptical about simplified statements, including LEBC public policy director Kay Ingram, who said that while savers would feel more confident in their retirement planning, it would not go far enough.
“Our experience of advising members of pension schemes is that they need help and encouragement to increase their pension savings to the level required if they are to be confident about their future,” she said. “A statement on its own is unlikely to be sufficient in addressing the savings gap between the AE contribution of 8% of band earnings and that needed to provide a moderate standard of living in retirement.”
She added that LEBC has seen an increase in demand for workplace-based advice, with 15% growth in members taking up the opportunity of an annual check-up and more employers wanting to offer this service to their staff.
Ingram called on Opperman to go further and make employers, trade unions and the public aware of the £500 per employee tax-free allowance already available to provide workplace advice to pension scheme members.
“Those employers who use this allowance to facilitate workplace advice receive much more value from their AE contributions. Our regular surveys of member satisfaction show respondents who take part in workplace advice are highly satisfied with their scheme,” she said.