Pension tools not up to scratch for post-April flexibilities, say experts

Communication experts have called for schemes to avoid jargon and break down complexity in online illustration tools, as research reveals wide variation across offerings and patchy understanding of reforms.

Employers have been urged to review digital communication offerings and online portals as savers use such tools for guidance on their options.

Communication consultants also called on the pensions industry to take collective responsibility for the provision of reliable online reference points to support savers’ understanding of the pension changes.

“There is an awful lot of confused information out there currently,” said Karen Partridge, head of client services for the UK and Australia at communication consultancy AHC. “All the changes are landing so quickly they’re being interpreted in different ways.”

Partridge said the industry needs to acknowledge that people’s first port of call for information is now the web, and there is room to improve online engagement. “We have to get reliable information into that part of people’s consciousness.”

Research published earlier this month by Altus Consulting showed extreme variation across 14 open-access pension calculation tools from some of the top insurance and wealth management companies.

Altus input data into different open-access illustration tools for a 42-year-old earning £29,360, with savings of £37,400 and pension contributions of 9.4 per cent, and generated a disparate array of results.
The most pessimistic provider quoted a total pot size of £115k while the most optimistic returned a figure of just under £370k.
The values for the likely retirement incomes ranged from just over £10k a year after taking a lump sum of £36k, to £25k a year with a lump sum of £60k.

The tools only suggested annuities as savers’ retirement income option and nearly a third of the tools did not enable the calculation of how much could be taken as a lump sum.

Commenting on the research findings, Richard Phillips, consultant at Altus, said simplicity was key to improving the current tools, and the UK could learn from US offerings.

“Tools built around lifecycle goals offer more realistic projections to show what income you need in retirement and more of a nudge now to say, if you want that sort of lifestyle in retirement it’s going to cost you this in real terms,” said Phillips.

He added: “These are tools that don’t just ask how much are you putting in now and what have you got already. They talk about what you want in retirement.”

The tools only suggested annuities as savers' retirement income option and nearly a third of the tools did not enable the calculation of how much could be taken as a lump sum.

Commenting on the research findings, Richard Phillips, consultant at Altus, said simplicity was key to improving the current tools, and the UK could learn from offerings in the US.

He added: “These are tools that don’t just ask how much are you putting in now and what have you got already. They talk about what you want in retirement."

Googling your retirement

‘Pension calculator’ was the second most Googled pension-related term in the UK last year, according a report last week by Jelf Employee Benefits, demonstrating savers’ reliance on such media.