Long term savings industry acts to take the jargon out of pensions
Association of British Insurers
A new guide to pensions language could see the end of terms such as ‘uncrystallised pension funds lump sum’ and ‘flexi-access drawdown’ which have been used since the pension freedoms.
Co-ordinated by the ABI, with the support of industry, Government and consumer groups, the new guide aims to make pensions language simple, clear and consistent in order help customers better understand their options at retirement.
Many people find the new retirement choices confusing, and across the long term savings sector, different terms are used to describe options. This guide aims to standardise the language used to describe options so customers can understand and compare products more easily without having to decipher technical terms.
Consumer research by Money Advice Service and ComRes found that :
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Terms such as flexi-access drawdown, fund, and uncrystallised pension funds lump sum are too confusing and should be avoided.
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Some terms such as ‘taking cash’ or ‘chunks’ from your pension are seen as too informal.
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Information about tax and fees should be mentioned explicitly and up front.
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People want pensions language to encourage them to take responsibility for their finances, but it should not be alarmist.
The ABI formed a Pensions Language Steering Group, involving industry, Government, regulators and consumer groups, to develop simple and consistent language. For the guide and the language to be consistently applied across the sector, the ABI is consulting more widely to gather views, including from media and consumer organisations, until 19th June 2016.
The ‘Making Retirement Choices Clear’ guide proposes the new retirement options be explained as :
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You can keep your pension savings where they are.
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You can take your whole pension pot in one go.
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You can take your pension pot as a number of lump sums.
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You can get a flexible retirement income.
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You can get a guaranteed income for life.
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You can choose more than one option and you can mix them.
ABI Director of Policy, Long Term Savings and Protection, Dr Yvonne Braun, comments :
"The industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them for their retirement. Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it’s important that we make these options as clear and comparable as possible.
“This guide to making retirement choices clear could make a real difference by helping people to better understand their options. But we need the wider sector to contribute to the consultation and implement the guide so that simple language can be used consistently across the whole market and by all those talking to people about their retirement income options.”
The ABI will be officially launching the consultation at its Transforming Long-Term Savings conference on Tuesday 19th April.
