ABI publishes simple language guide for pensions

ABI publishes simple language guide for pensions

The Association of British Insurers has published a language guide for communicating pension freedoms to retirees, in an attempt to standardise and simplify pension jargon.

The guide, called Making Retirement Choices Clear, calls for the new freedoms introduced in April 2015 to be communicated in a "clear, consistent manner, avoiding technical terms where possible".

It comes after a survey by Populus revealed complex jargon was putting consumers off thinking about their finances.

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Just 31 per cent of respondents in the survey disagreed with the statement, "the complexity of the language around pensions deters me from thinking about my finances in retirement." 

ABI assistant director, head of retirement policy, Rob Yuille, said the industry recognised that pension language could be confusing, and was often a deterrent for people thinking about their pension.

"We want to help customers engage with their long-term savings plans so it’s important that we, as an industry, make these options as clear and comparable as possible. This is a responsibility not only for the industry but for anyone communicating with the public about retirement options."

The Money Advice Service pension and retirement expert Jackie Spencer said the guide would bring "much needed consistency to the way organisations talk about pension pot options, ensuring that people can gain a much better understanding of the retirement choices available to them".

The Populus survey also found 48 per cent of people were not confident of the tax rules regarding their pension. Just 26 per cent reported themselves as being fairly confident.

The ABI guide recommends communicating pension freedoms as six simple choices for the consumer, laid out as follows:

You can keep your pension pot where it is; you can take your whole pension pot in one go; you can take your pension pot as a number of lump sums; you can get a flexible retirement income; and you can get a guaranteed income for life.

For each option, the guide provides a simple, four-to-five-line explanation. 

The ABI said that while implementation of the guide was voluntary it hoped firms that decided to adhere to it would do so by April 2018.

An appendix provides details of tax, fees and the option of continuing to contribute to a pension beyond retirement age.

Claire Walsh, a chartered financial planner at Active 8, welcomed the guide, calling it a "great idea".

"Clients are often utterly confused by the jargon and these are people who have me to explain it and hand-hold them through, for those trying to decipher these things on their own it is indeed a minefield."  

However, she added language was only part of the problem.

"A big part of the problem is the way the information is formatted and just the volume of information that people receive. I think the government's proposed pension dashboard sounds promising too," she said.