At the 2018 Pensions and Lifetime Savings Association (PLSA) conference in Liverpool it was suggested that staff were leaving their defined contribution pension schemes because employers had not explained them properly.
A study conducted by research consultancy Ignition House has shown that 42 per cent of people did not know how much was in their defined contribution scheme, and 26 per cent did not know how much they were paying in.
Director of Ignition House and co-author of the research - Janette Weir - stated that there appeared to be a lack of understanding about details of the employer’s pension schemes. She said:
“It became clear to us that workers who opted out were making decisions very quickly – with very little input from their employer. There was no evidence that any employer was encouraging them to join. There was very little interaction, and it was often just a leaflet or a booklet given to them.”
Evidence was found that implied that pension members in the UK are not engaged with their annual statements and - even when they are engaged - do not fully understand the contents.
Janette Weir added:
“The annual statement is currently a missed opportunity for companies to communicate properly with their members. Worse than that, members taking part in the research told us that their statement is actually contributing to their confusion, making them feel stupid and leading to apathy.”
The TUC’s policy officer for pensions - Tim Sharp - said that it was a matter of concern to him as to who was explaining pensions to employees. He stated:
“People get pension statements, but many employers typically outsource their pensions to another provider so it’s not their responsibility to talk about it. But the provider also says it’s not their responsibility to talk about it.”
Respondents in the research felt that their pensions are important as they recognised that it is likely to form a main source of income for them in the future.
One female aged under 35 years had received her last statement - but did not read it. She reported:
“It is something that I think about more now I am 27 and in the process of buying my first home – before that I didn’t understand any of it and I would have thought pensions are only for old people. A pension is important to me if I ever want to retire.”
A male respondent, aged over 35 years stated that he had read his last statement and understood it well. He said:
“Although I still have a while to go yet, I try to keep an eye on my workplace and private pensions, because they will be what I will have to live on when I do retire.”
The Simpler Annual Statement - developed by Ruston Smith - which was launched recently will try to provide simple and personalised information on an employee’s retirement savings.
Ruston Smith - co-chair of the Department for Work and Pensions’ 2017 Automatic Enrolment Review Advisory Board and chair of the Tesco Pension Fund, alongside experts with the pension industry – said:
“We have a responsibility and the ability to help our members achieve the best outcome they can in retirement. By working collaboratively together and making statements and other communications we send them simpler; more readable and consistent across the industry are important steps in our journey to engage with them.”
