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.
“Self-invested personal pensions can be more complex, with some holding more exotic and illiquid investments, but it could still be possible.”
Mr Morris said standardisation needed to cover charges disclosure too as these varied from one provider to the next.
Mr Morris said: “We definitely need to see clarity when it comes to charges, as well as more standardisation.
“The Mifid II charges vary greatly from one provider to another. This becomes a real headache when you have clients with different plans with different providers.”
Various pension providers have also shown their support for shorter statements.
Andrew Tully, technical director at Canada Life, said the new layout should be similar to a bank statement.
Mr Tully said: “This would include ‘starting value’ at the beginning of the year; any deductions throughout the year (eg, charges, payments out); additions through the year (eg, payments in); investment gain/loss over year; and ‘end of year value’. This should all be shown in pounds and pence.”
He added that both workplace and retail pensions should be presented in the same way although some additional information may be needed for personal pensions.
Mr Tully said: “Some schemes are more complicated. The general concept/info/layout should be the same, but there may need to be some additional information if there are more esoteric investments for example.”
Pete Glancy, head of policy at Scottish Widows, said the industry had done a lot in recent years to make statements simpler but had not done it in a way which was consistent across providers.
He also said simpler statements should be included as part of the pensions dashboard.
Mr Glancy said: “The pensions dashboard will be the one place an individual will go to look at multiple pots at one time and the front page will probably show you the value of these pots in aggregation.
“A good place to build simpler statements would be in the dashboard eco-system, so that when an individual clicks on one of the pots their two page statement comes up and provides them with all the information that they need to know.”
amy.austin@ft.com
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