Personal Pension  

ABI tells advisers to stop saying flexi-access drawdown

ABI tells advisers to stop saying flexi-access drawdown

The Association of British Insurers has picked through pensions jargon and produced a guide detailing what engages adviser’s clients and what bemuses them.

The guide aim is to make pensions language simple, clear and consistent in order to help customers better understand their options at retirement.

According to the ABI, many people find the new retirement choices confusing, and across the long terms savings sector, different terms are used to describe options.

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However, this guide aims to standardise the language used to describe options so customers can understand and compare products more easily without having to decipher technical terms.

Consumer research by Money Advice Service and ComRes found terms such as flexi-access drawdown, fund, and uncrystallised pension funds lump sum are too confusing and should be avoided.

Additionally, some terms such as ‘taking cash’ or ‘chunks’ from your pension are seen as too informal, and information about tax and fees should be mentioned explicitly and up front.

Finally, the guide stated people want pensions language to encourage them to take responsibility for their finances, but the terms used should not be alarmist.

The guide comes after the ABI formed a Pensions Language Steering Group, involving industry, government, regulators and consumer groups, to develop simple and consistent language.

The Pension Language Steering Group consists of the Association of British Insurers, the Association of Professional Financial Advisers, the Chartered Insurance Institute, Citizens Advice, the Department for Work and Pensions, the Financial Conduct Authority, HM Treasury, the Pensions and Lifetime Savings Association, the Personal Finance Society, the Money Advice Service, the Pensions Advisory Service and the Pensions Regulator.

So that the guide and the language is consistently applied across the sector, the ABI is consulting more widely to gather views, including from media and consumer organisations until 9 June 2016.

Dr Yvonne Braun, director of policy for long term savings and protection at the ABI, said: “The industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them for their retirement.

“Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it’s important that we make these options as clear and comparable as possible.

“This guide to making retirement choices clear could make a real difference by helping people to better understand their options.

“But we need the wider sector to contribute to the consultation and implement the guide so that simple language can be used consistently across the whole market and by all those talking to people about their retirement income options.”