Advisers have called for rules to make all pension providers produce annual statements with the same information in the same format, making it easier for clients with pension plans across a variety of providers.
This was in response to the department for Work and Pensions' consultation, published on November 1, on enforcing simpler annual benefit statements for workplace pensions which are shorter and include cost information.
The DWP is looking at how the adoption of 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 their annual statements.
It is also pushing for statements to be presented in a consistent way so that savers are able to understand their pension savings more easily.
Advisers have welcomed the proposals saying this should help people become more engaged as there will be less information for them to process.
Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, said: “Often we hear clients filing their pension statements away without even looking at them. This is usually because they’re quite disengaged about their pensions and do not understand them.
“I’d start with a new canvas for pension statements, and introduce a simple one page statement with no jargon, and the least amount of information possible (ie, just the very important stuff).
“I would also use some engaging graphics and colours to explain what these numbers mean in terms of a retirement lifestyle. In addition, there should also be a reminder of the tax benefits and longer term benefits of saving into a pension.”
Mr Chan explained pension statements do not need to be pages upon pages in length as they only had to answer one important question.
He said: “The information just needs to help the client answer one question: ‘Am I on or off-track for my retirement goals?’ so this includes having information showing, ‘How much money has my pension funds made since inception?’ and ‘What is my pension fund projected to be?’."
Tim Morris, independent financial adviser at Russell & Co, agreed.
Mr Morris said: “The statement should include information on what the individual has paid in by and any employer contributions, any basic rate tax relief added (many still don't appreciate that benefit), any costs and the net growth percentage.”
The changes suggested in the DWP’s consultation only apply to workplace pensions but both Mr Chan and Mr Morris said they should apply to all pensions.
Mr Chan said: “Some uniformity is needed as statements vary wildly between providers, making it hard for clients with multiple pensions to understand.
“So perhaps the one page statement should be the same for all pension providers, and then they have discretion to use their own statements for the finer details.