There is widespread ignorance and confusion about common acronyms used across the pension industry, with just 2 per cent of UK adults knowing what ‘ESG’ stood for.
Recent research showed that three quarters of adults did not know what any of 11 commonly-used terms meant, which included ‘Sipp’, ‘DB’ and ‘DC’.
Sipp was the most widely recognised term, but less than one in 10 (8 per cent) of respondents knew it stood for ‘Self-invested personal pension’.
This research by Aegon comes in ‘Pensions Awareness Week’ and highlights the importance of schemes simplifying communications and using plain English to boost understanding and engagement.
It points out that acronyms are commonplace in the financial services industry. It says while have a role to play in shortening phrases and complex terms for those within the industry they can lead to confusion for millions of customers if they are not properly explained.
The research comes as the financial regulator is introducing a new Consumer Duty – which will set higher standards in all parts of the retail financial services industry and make sure customers are receiving good outcomes. This acknowledges the need or clarity when it comes to communications, requiring firms to ‘provide timely and clear information that people can understand about products and services so consumers can make good financial decisions’.
Aegon pensions director Steven Cameron says: “As the industry seeks to help people engage with their pensions and to deliver good outcomes, we wanted to test just how huge an understanding gulf there is. The results were eye opening with three quarters of people not knowing what a single one of the eleven acronyms tested meant. Our industry needs to take note!
“The first cross-industry ‘Pension Attention’ campaign has kicked off this autumn, including the annual Pensions Awareness Week, which should help to connect more people with their pension. Pensions can often seem daunting for those who don’t know where to start, so it is important that the industry cuts out confusing acronyms and truly engages with individuals with clear language.”
The terms included in this research were:
- SIPP – Self Invested Personal Pension
- DB – Defined Benefit
- DC – Defined Contribution
- LTA – Lifetime Allowance
- ESG – Environmental, Social, Governance
- GPP – Group Personal Pension
- AA – Annual Allowance
- GMP – Guaranteed Minimum Pension
- SPA – State Pension Age
- MPAA – Money Purchase Annual Allowance
- NMPA – Normal Minimum Pension Age