Nest to ban ‘target date’ and ‘annuity’ words

The phrasebook, which was welcomed by pensions minister Steve Webb and the Association of British Insurers (ABI), calls for an end to much-derided jargon such as ‘trivial commutation’ and ‘decumulation’.

But the booklet also proposes commonly-used phrases such as ‘target date’ and ‘annuity’ should be banned, and words such as ‘pension’ and ‘default fund’ should always be accompanied with simplified definitions.

Speaking at an event this morning, Nest Corporation chair Lawrence Churchill (pictured) said he wanted an alternative to ‘default fund’ as he did not want savers to feel they had “copped out” of making an active decision.

“We are having trouble at the moment coming up with a better vocabulary for ‘default fund’, but as ever we welcome feedback from the industry," he said.

Nest Corporation has today opened a discussion forum to attract suggestions from the wider industry. It has also launched a definitions-based game, which it hopes will become a viral hit.

Also speaking at the event, Webb said: “Auto-enrolment is going to be a social revolution. It’s a once in a generation opportunity to get it right."

He added: “Better communication is not necessarily about fewer words; it’s often about more, but simpler words.”

Nest Corporation launched the phrasebook – which it insists is a first version and far from complete – following 14 months of both qualitative and quantitative research with its target audience (those aged 22-65 years old and earning between £5,000 and £35,000).

A YouGov survey revealed just 10% of respondents completely understood the term ‘open market option’. The corresponding proportion for ‘annuity’ was 23%.

But Nest Corporation chief executive Tim Jones said there was also a problem of respondents not realising how little they understood. For example, of the 35% of respondents who claimed to completely or mostly understand ‘lifestyling’, just 20% were able to provide a correct definition.

The phrasebook suggests replacing ‘trivial commutation’ with ‘taking your retirement pot as cash’, and always providing the following definition: “If your retirement savings are less than £18,000 you might be able to choose to take this money as a cash lump sum instead of buying a retirement income.”

Jones said: “There is a clarion call to keep communications with members simple, but also not to patronise them.”

He added: “Financial services is a low interest topic in general – and pensions is a low interest within that. We in the pensions industry must understand that.”

Also at the event was a panel with representatives from the ABI, the Consumer Financial Education Body, Which?, the Investment Management Association (IMA) and Aviva.

Doug Taylor, the financial services chief advocate at Which?, said there was a danger that if different organisations produced their own vocabularies this could increase the complexity for pension scheme members.

“We needs to get to a stage where the language we use has a universality about it so it becomes a step forward rather than a step backwards,” he said.

But Victoria Nye, director of training and education at the IMA, said this would not be a problem if there was a “harmonising of language”.

“We don’t always have to say exactly the same words or exactly the same phrases – but we should mean the same thing,” she added.