The Department for Work and Pensions (DWP) has pushed back the introduction of simpler annual workplace pension benefit statements until October 2022 after pension schemes and trustees raised concerns that they required more time to adopt the new requirements.
The DWP had originally mooted an April 2022 start date but said many industry responses “raised issues” around the preparedness of schemes to make changes.
The reformed statements for workplace pensions will allow scheme members to see how much money they have in their pension plan and what has been saved in the statement year; how much money they could have when they retire; and what they could do to give themselves more money at retirement.
The Government first consulted in November 2019 on how workplace pension benefit statements could be reformed and in October 2020, set out its intention to mandate two-page simpler statements for defined contribution pension schemes used for auto-enrolment.
Guy Opperman, minister for pensions and financial inclusion, said: “I believe that short, simple statements will usher in a new standard for how schemes communicate with their members – greatly improving people’s understanding and engagement with their pensions.”
The pensions minister said he wanted to “cut through” the jargon and complexity that often mars public understanding of pensions.
“Annual statements are long established but should not simply provide information which is indigestible to the saver and which results in them being unread or without the saver being able to understand their content.
“They should guide a saver through a straightforward narrative that enables them to see how much money they have in their pension plan and what they have saved in that year; how much money they could have when they retire and prompt them to think about what they could do to give themselves more money when they retire.”
The Government said it would continue to focus on paper-based statements, despite increasing digital innovation within pension communications including pensions dashboards and video statements.
“We believe that paper-based simpler annual benefit statements are, and will remain, a well-established form of communication option for many, including those who are digitally excluded. It is therefore right that through regulation we ensure the opportunity paper-based statements offer to engaged members with their savings is not lost due to complexity and lack of consistency,” it said in a statement.
Tom Selby, head of retirement policy at AJ Bell, commented: “The Government deserves credit for attempting to simplify the information people receive about their pensions.
“Far too much paper is wasted sending savers reams of documents about their pensions that they simply cannot engage with.
“While some of this information might be useful in theory, the reality is it will often end up in the nearest bin. When it comes to retirement communications, less is often more.
“Slimming down workplace pensions communications to a two-sided piece of A4 paper should improve the chances of members taking an interest in their retirement pot. And while clearly the future is digital, there are many people for whom a paper statement will be the key form of communication they receive about their pension.”
Selby said the introduction of pensions dashboards – another key element of the DWP’s retirement engagement strategy – will also allow people to glean a better understanding of their pension savings.
Selby added: “Once fully introduced, these hubs should allow people to view all of their retirement pots in one place online.
Over time dashboards could include key information on things like costs and charges, providing an entire generation with the tools they need to get the most from their hard-earned savings.”