The government is preparing to legislate for both simpler annual pension statements and a 'pension statement season', the pensions minister has said.
In a pre-recorded speech at the Pensions and Lifetime Savings Association’s annual conference today (October 12), Opperman said the government wants people to better understand their pensions and would achieve this by simplifying the communication they are sent from providers.
In order to boost member awareness and ensure people engage properly with their workplace pensions, he said the government will “shortly… be laying the regulations for simple annual benefits statements.
“Simpler statements, in my view, will usher in a new standard for our schemes to communicate with our members,” he said, while a “statements season”, for which the government also intends to legislate, “will maximise the impact of simpler statements which will stimulate greater debate amongst the public”.
The DWP set up a working group in August to look into the introduction of a statements season - which would see all workplace pension statements sent to members within a short window each year - though experts including the Pensions Administration and Standards Association have since warned that it could create “significant difficulties, additional and unnecessary costs, and adverse implications for schemes and administrators”.
Opperman, however, said he remained “committed to simplifying the pensions system”.
The pensions minister has said auto-enrolment had been a “game-changer” and “transformational”, especially for women.
“The stats speak for themselves. In 2020, people contributing to a workplace pension included 86 per cent of women, 79 per cent of low earners and 84 per cent of young people,” he said, but he added that there is “still more to do.
“Removing the lower earnings limit will proportionately benefit the lowest earners most, and extending eligibility to age 18 will support our youngest workers to start saving for more secure retirement.”
The government has previously said it wants to raise the earnings limit from the current £10,000 per year and cut the age of eligibility from the age of 21 but has not yet actioned the reforms.
Move to net zero
In addition, Opperman reiterated the government’s belief that transitioning to a “net zero” economy was essential in order to stop the world losing “entire countries” to climate change “within a century”.
“To avoid such a scenario, economies around the globe must be in a position to transfer to a Net Zero economy,” he said, adding: “This presents a major systemic financial risk, and a threat to the long term sustainability of UK private pensions.”
He hailed the “groundbreaking” regulations introduced by the DWP, making the UK “the first country in which trustees must consider, assess and report on the financial risks of climate change within their portfolios by 2022.”
These requirements will at first be mandatory for all occupational pension schemes with more than £1bn in assets.
“These measures are utterly transformational. Never before [have] trustees [been] required to show how climate change will affect their portfolio. They are being publicly held to account for [their] decisions,” Opperman said.