The pensions industry has welcomed government plans to simplify annual statements for DC schemes.
Following a consultation the Department of Work and Pensions will make it compulsory for AE schemes to use simpler two-page templates for annual statements.
It said a voluntary approach had not delivered sufficient consistency across the industry and “progress remains too slow” on this issue.
It pointed out that many pension statements will remain “lengthy, inaccessible and inconsistent in design and content”.
Reform will focus on creating a standarised two-page annual benefits statement, which will signpost to more detailed information on investments and charges.
There will be further consultation before new regulations are introduced, which will include looking at the merits of introducing a ‘statements season’.
While these new standardised statements will apply to AE schemes initially, the DWP said it remains an ambition to ensure all pensions schemes might offer similar simplified statement.
However it acknowledged opinion was split on the values of putting costs and charges information on the simpler statement, as this may increase the length and complexity of this template.
AJ Bell senior analyst Tom Selby says: “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.
“The ‘less-is-more’ approach set out by DWP feels like the right one, and if we can move to a world of greater simplicity and consistency for annual benefit statements that can only be a good thing.
He adds: “This is the right time to put in place a review of all disclosure to all pension consumers, both paper-based and online. It’s important we help people understand what their pensions are worth to them, the value they offer, and, as part of that, what they pay for them.”
Smart Pension also welcomed this announcement. Its director of policy Darren Philp says: “This is good news and is a great step forward in simplifying pension communications. We’ve already adopted the simplified statement at Smart and we applaud the Minister’s ambitions to extend this to all auto enrolment schemes. Linking to information on costs and charges is also a welcome step forward.”
He added: “We are also glad the DWP has parked the idea of the orange envelope.
“While this idea has much merit, more and more people are going digital with their statement, so we should always think digital first in communicating and engaging people with their pensions. The pensions dashboard and the technology underlying that will provide a great opportunity to change wholesale the way we communicate pensions.”