There is a widespread lack of understanding among people around common pension acronyms, highlighting the need for clearer communication from the pensions industry, says Aegon.
A survey of 2,000 UK adults found 74% could not identify any of the acronyms listed by Aegon. The list covered 11 acronyms, including those used for defined benefit, defined contribution, lifetime allowance and money purchase annual allowance.
Of the acronyms that people did understand, SIPP was the most well known but only 8% were able to explain what it meant. The term ESG also caused confusion, with only 2% of those surveyed able to correctly identify the term stood for, despite the rise of sustainable investing and growing focus on “net zero”.
Steven Cameron, pensions director at Aegon, said providing “clear and understandable” communication is essential when it comes to explaining financial products and services.
Cameron said: “The financial services industry is not alone in loving an acronym, but that love isn’t shared by consumers. As the industry seeks to help people engage with their pensions and to deliver good outcomes, we wanted to test just how huge an understanding gulf there is. The results were eye opening with three quarters of people not knowing what a single one of the eleven acronyms tested meant.
“We shouldn’t underestimate the power of using every-day language as it can make a huge difference between confusing or helping people to better engage with their pension and make informed decisions.”
Cameron added “The financial services industry is very focused on demystifying pensions through communications designed to boost engagement and explain the basics. The first cross-industry ‘Pension Attention’ campaign has kicked off this autumn, including the annual Pensions Awareness Week, which should help to connect more people with their pension. Pensions can often seem daunting for those who don’t know where to start, so it is important that the industry cuts out confusing acronyms and truly engages with individuals with clear language.”
[Main image: matthias-heyde-8HLMLrkyLvE-unsplash]
