The government’s plans to send savers simpler pension statements is a positive move but there still remains disparity across the industry and more needs to be done to make pensions language easier to understand, according to the guests on the latest edition of the FTAdviser Podcast.
The government is looking to make it mandatory for providers to issue simpler statements for certain defined contribution pension schemes used as part of auto-enrolment.
The changes are set to come into effect in April 2022 and while only auto-enrolment savings are being focused on for now, the government said it would look to introduce greater simplicity across all schemes in future.
But the government's proposals stop short of making providers include costs and charges, whereas the FCA is pressing ahead with forcing the provider it regulates to disclose them in detail.
So there remains disparity across the industry.
Speaking on the podcast Claire Trott, head of pensions strategy at St. James’s Place, said: “The requirements for disclosure and transparency that's been forced upon Sipp providers particularly, and other schemes regulated by the FCA, for costs and charges, are making things so much more complex.
“One, for providers to produce the statements and two, for clients to understand what they're paying because it's got down to such a level of detail that I've even looked at them and thought what does this charge relate to.
“But you will not see any of this on DWP statements, which is a massive disparity.
“The DWP turned around and said ‘that is way too complex, it will confuse people’ and the FCA said ‘no, we should have transparency because if we don’t think it will confuse people’.
“So we're back to this question of what will people understand.”
Jessica List, pensions technical manager at Curtis Banks, expressed concern that although simpler statements will help savers, the pensions terminology within them may still be hard to understand for the average saver.
List said: “A lot of pension terminology can be really off putting and a big barrier for consumers.
“But one difficulty of removing this is that you then have different providers using lots of different terms and using lots of different ways to explain things.
“So rather than now looking at lots of statements that use the same one term, you could have five different explanations that make it sound slightly different.”
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