People would be happy to see changes to pensions if it just made them simpler

Gareth Davies, 09 November 2016

Pension enthusiasts and detractors will note that there has been a lot of change in the pensions industry, especially in terms of policy and regulation.

In the last few years we have seen big ticket changes such as the introduction of auto-enrolment, the Freedom and Choice reforms, the new State Pension and talk of the Lifetime ISA (LISA) as well as the regulatory bodies focusing greater attention on scheme members.

Some of the changes we have seen have been more than just a nip and tuck here and there – they have challenged the very nature of what a pension is and what retirement now means. The Freedom and Choice reforms will make many of us revisit what we now do at retirement and whether we lock in on that guaranteed income for life at all. LISA could provide a genuine dilemma for younger savers from April 2017 – do they put money into a pension or save towards a home...

Changing the pensions system must feel like pushing treacle uphill sometimes. Despite all the good intentions, the pace can feel pedestrian to those with long-term reform in mind, but too quick for the end user, the ordinary pension scheme member.

We know from our own research in our Employee Insight Report that a pension can feel pretty intangible at times, especially in the way we communicate these. From our survey of some 3,000 UK employed individuals, 49% say they find pensions terminology to be complicated and confusing and a barrier to plan effectively for retirement. Furthermore, 51% of employees don’t know how much they should be saving for retirement, 63% of employees in defined contribution schemes say they do not know where they’re invested and 51% of employees don’t even know what income they will need when they actually retire.

It did get us thinking: have we seen too much change, are we just confusing people even more now, have we forgotten the end user, are we at risk of losing people…?

But one thing did emerge from our research which suggests that the pension industry may be on the right track. 57% of employees say they would happily see further changes to pension rules if it made pensions easier to understand. Just 6% disagreed.

This actually sounds like an invitation to keep on going! Yes, pensions are complex. Yes, it feels like today’s pension savers and retirees have even more to think about than previous generations. But if it means we can create a system that works, that just makes sense, then people will be patient with us.

We will continue to report on, and share with you, the changes that take place within our industry. We will continue to work with the government when it consults with the industry on proposed changes to the pensions system. And despite the often short timescales and head scratching we may be able to take some comfort in the fact we are moving forwards and that the end user – the membership – want us to create something they truly value, that’s relevant to them. But we just need to keep things as simple as possible for them with regards to this incredibly complex topic...

About the author

Gareth Davies Head of Research and Engagement

Gareth Davies

Insight Research

Our research reports are aimed at Pension Trustees and HR Directors, covering topics such as pensions, health, flexible benefits, engagement and wellness. They are free to download!

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