The government is consulting on amending current rules so that pension providers will have to include costs and charges in members' annual statements.
The department for Work and Pensions today (November 1) published its consultation 'Simpler annual benefit statements for workplace pensions' looking at how it can deliver annual statements for workplace pensions which are shorter, simpler and include cost information.
The DWP is seeking views from providers and others in the industry on how the adoption of these shorter statements could be delivered via either mandatory or voluntary approaches, with the government committed to introducing regulation if needed.
In particular, the government is keen to amend the current disclosure regulations for workplace schemes to require providers to include costs and charges in pounds and pence on annual benefit statements.
This would cover all workplace pensions but the government is not planning to extend the requirements to annual benefit statements produced for non-workplace pensions “at this time”.
This is because the Financial Conduct Authority is already considering cost transparency measures for non-workplace scheme as set out in its feedback statement in July.
The government believes having signposted charges and cost information will help savers understand what they are paying for and why and will also allow more effective comparisons between providers and schemes.
Pensions minister Guy Opperman said: “Pension statements are too long, too wordy, full of jargon and confuse savers. People don’t read them, or if they do they can’t make head nor tail of them.
“Simpler statements provide clear information that people will actually understand and this will encourage them to save more.
“I want pensions schemes to drive forward real change quickly but, if necessary, I will consider regulation.
“Savers who have more than one pension pot and receive more than one statement find it hard to compare them. Simpler statements will fix this.”
The government is pushing for shorter statements with simpler, jargon-free, language and key figures that are presented in a consistent way so that savers are able to understand their pension savings more easily as well as what they have to do to boost their retirement income.
It wants providers to focus the statements around three questions:
- How much money do you have in your pension pot?
- How much money could you have when you retire?
- What can you do to give yourself more money in retirement?
The government said there were a number of approaches that could be adopted to ensure these statements are made shorter.
Providers could adopt the two-page approach of the simpler statement which can be read in a couple of minutes and where useful information is not included it can be signposted via links to online material.
Another option is the layered approach where two pages service as the top sheet which provides key information but additional information is provided to those who want to know more and are likely to engage with a longer document.
The DWP said it recognises implementing costs and charges into the statements may come at a cost for providers. It is therefore inviting views on how initial costs can be kept down.