New annual pension statement – Hymans Robertson and like minds propose enhancements
22 Oct 2018
The PLSA launched a proposed new annual pension statement to be adopted by employers and pension providers. The simplified statement aims to show members how much money they have in their pension plan, how much they would have on retirement, and what they could do to increase their retirement money.
Moira Throp, director and co-founder of employee communication specialists like minds, commented on the proposals:
“The industry’s concerted effort to create a common approach to member communication is to be applauded. It has been a long time coming but is a positive step forward - and much needed to encourage providers and employers to communicate more effectively.
“Members will certainly find the proposed simpler pension statement more approachable and understandable compared with many of those currently being issued. It’s a good start."
Addressing the savings gap
“It’s good to see the statement starting to address the gap between what people are saving and the likely income they’ll need in retirement. We would suggest, however, that this retirement income figure be included in the statement rather than relying on people to go to the target income website to find it - it makes a more immediate impact.
“We’d also like to see the potential increased contribution to the scheme translated into increased income. That way, members can see how it would help them in their retirement. It’s hard to translate pot size into anything meaningful.
“It is essential we help the AE generation get their heads round the large income gap they’ll face come retirement if they don’t pay more than the minimum into their pension. The more we can do here, the better.”
Rob Harper, Partner at Hymans Robertson added:
“The simplified statement is a big step towards helping DC members achieve better retirement outcomes. A statement needs to answer five simple questions:
"what does it cost me?
how are my savings growing?
how much might I eventually get?
how much might I need?
what can I do to save more?
"The proposal addresses 1, 2, 3 and 5 but I would have liked to see more explicit guidance on point 4 to illustrate what sort of income a member should typically be targeting.”
Moira Throp further commented:
Appreciating employer contributions
“While appreciating the need to get this onto two pages - so space is at a premium - it’s helpful for members to see any increased amount paid in by their company. This can be quite a differentiator and would help reinforce the message of financial support from their employer.
Moving onto digital
“Despite this progress, we are still a long way behind the fast-moving open banking world with its instant access, flexibility and help to save options. It’s a shame to see such a reliance on a traditional paper/pdf format – though there may be a digital mobile option in development that has yet to be released.
“To have an app where you can instantly access your latest statement information, investment returns and see how your increased contributions could change the outcome for you in retirement – now that would be exciting!”