Workplace providers such as Smart Pension and PensionBee are supporting the government’s intention to introduce a standardised annual statement, with calls for legislation if take-up from schemes does not increase.
However, Royal London is against such changes, as it would cost up to £3.6m for the mutual insurer to move to a standardised format.
In November, the Department for Work and Pensions launched a consultation on measures to hasten the adoption of two-page simplified pension statements, in response to sluggish uptake from the industry.
Simple statements were first suggested by the 2017 automatic enrolment review. They set out to engage members who are confused or deterred from reading their statements by long, complex paper documents.
For too long this industry has been too opaque about the costs and charges faced by members, and we are fully supportive of pounds and pence transparency
Darren Philp, Smart Pension
An example statement was developed by industry practitioners and released in October 2018, but pensions minister Guy Opperman said he was frustrated by the pace of improvements.
“Pension statements are too long, too wordy, full of jargon and confuse savers. People don’t read them, or if they do they can’t make head nor tail of them,” he said at the time.
Regulators should endorse template
In response to the consultation, which closed on Friday, Smart Pension stated that “simpler, clearer, and comparable annual statements could help pension scheme savers plan for their retirement”.
Darren Philp, director of policy and communications at the master trust, noted that it would be useful if any two-page statement templates could be endorsed by, and explicitly approved by, both the Financial Conduct Authority and the Pensions Regulator.
“This would aid take-up and adoption. If the government does decide to go with a two-page templated statement, then it would need to ensure this continues to meet regulatory requirements, with enough lead time made available to providers to make any changes,” he said.
Smart Pension is supportive of a voluntary approach. However, “if the industry does not respond positively, then the case for making this mandatory becomes stronger”, Mr Philp added.
Consolidator PensionBee has a more firm stance, and is asking for the government to mandate schemes to adopt the simpler statement.
In its response to the consultation, Clare Reilly, head of corporate development at PensionBee, said: “It’s clear from the lack of take-up so far and commentary from firms on this approach that only legislation can deliver the right thing for consumers.
“We know that the legacy providers, and those representing their interests, will argue against the two-page template and for the design-based approach as that will enable them to continue to produce statements that obfuscate fees and deny consumers the ability to make meaningful comparisons across different pots.”
Pounds and pence charging needed
The government also questioned providers if the simpler annual statement should include a charges and fees disclosure.
PensionBee and Smart Pension both agree that a pounds and pence charging should be mandatory.
Ms Reilly said: “We believe that charges and fees are an essential part of any member engagement strategy. Members need to know how much they are paying in order to be able to compare with their charges on other pots held with other providers.”
Mr Philp added that for too long the pensions industry “has been too opaque about the costs and charges faced by members”.
He said: “While there are risks if this information is presented out of context, we believe that proper framing of this information will help people value their pension savings more and create a greater sense of ownership for pension savers.”
Henry Tapper, chief executive of pension comparator AgeWage, also agrees that a pounds-shillings-and-pence statement is the most effective way of presenting charges, and should always be calculated.
“Frankly, who gets paid out of these costs and charges is of little interest to savers,” he said.
“They are interested in how much is being taken from their pots to pay for the return they get, whether this money goes to the plan manager, the fund manager or the legion of subcontractors who help invest the money and govern the money is of little moment to the saver. They want to see a total bill – including VAT and everything else.”
Changing statements would hike costs
On the other side of the balance is Royal London, which while supporting the aim to improve customer communications, stated that adopting a standardised, shortened format would lead to important information being left out.
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In its response, the mutual insurer stated that a shorter format “omits key calls to action such as updating beneficiaries, and that more needs to be done to signpost members to where they can go for more information”.
The provider also highlighted that moving to a standardised format could cost the company £3.6m, with further expenses for legacy customers.
Isobel Langton, chief executive of Royal London Intermediary, said: “While we certainly support the aim to improve how we communicate with customers, we feel that taking an industry-wide, standardised approach is not the way to go.
“Shoehorning the statement into two pages means important information on costs, charges and investment growth could be omitted.
“We also want the flexibility to include important messages such as the value of taking financial advice, our profit share scheme and where to go to get more information. Adopting a more principles-based approach will enable us to do this.”
