Breaking down the barriers to pensions understanding
Pensions have been seen as unfathomable for too long. George Currie says two initiatives currently underway may begin to change this perception.
For many savers, when a statement drops on their doormat labelled ‘pensions' the initial reaction is to put it in a drawer to tackle on another day. After all, pensions are too complicated to communicate and understand, right?
Well hopefully, wrong.
For too long now pensions have been seen by many to be unfathomable, or simply a problem for another day. After all, it's difficult to suggest to a 25-year-old that they need to consider their options for something that's going to happen in half a century's time. Yet, perhaps, by making these products easier to digest from the outset, we'd stand a better chance of gaining greater engagement.
It's for that very reason that the Pensions and Lifetime Savings Association (PLSA) is working with the Association of British Insurers (ABI) to promote the Simpler Annual Statement (SAS) as an example of good practice in pension communications.
The SAS offers a more straightforward way of communicating with savers. It can be read and, crucially, easily understood by savers with different levels of interest.
The PLSA hopes that the SAS will be widely adopted by schemes and providers across the industry. If this happens, we believe that it will make it far easier for savers to compare all of their pensions and start on the road to understanding what their savings mean for their retirements.
It's important to recognise that, on its own, the SAS is not a panacea. It would form part of a suite of initiatives that sit alongside the creation of the Money and Pensions Service (MAPS) and our very own retirement income targets. These initiatives will make it easier for savers to engage with their pensions and gain a greater understanding of their future retirement income.
As we stated in Hitting the Target last year, the PLSA firmly believes both the government and the pensions sector must do more to ensure everyone has an adequate income in retirement. To do that the industry must do all it can to communicate its messages to savers more effectively.
The Pensions Dashboard will do much to enhance the industry's ability to communicate clearly with savers.
Earlier this year the government published its response to the consultation feedback it received from the industry on the pensions dashboard feasibility study. After exploring many different aspects of the project including structure, funding, governance, and scheme participation, it restated its commitment to the project and emphasised its belief that dashboards will open up pensions to millions by providing an easy-to-access online view of a saver's pensions.
This is music to the PLSA's ears. Yet as we stated at the time, this is only the beginning of the journey.
The government is clear that it wants to introduce dashboards as quickly as possible. But to achieve that goal, the industry and the government need to work together to iron out some challenging issues.
The delivery of a non-commercial Pensions Dashboard by the Money and Pensions Service (MAPS) will rely on a clear and comprehensive delivery plan that will give schemes a clear understanding of what's expected of them and when.
To ensure the successful launch of dashboards, it is important that data held by schemes on savers' pensions is accurate and up-to-date. The PLSA is working with its member schemes to ensure they are fully aware of this. We are also continuing to emphasise to the government just how important it is to have accurate state pension data on dashboards from the very beginning, as this will be the biggest single source of retirement income for many people.
We are eager to see dashboards become a reality as soon as feasibly possible. Alongside other ongoing engagement initiatives that are changing our industry for the better, dashboards will help savers of all ages to be aware of just how much they are putting aside for the day they hang up their work clothes for that very last time.
George Currie is policy lead for lifetime savings at the PLSA
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