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Pensions minister: How we can boost engagement in 2018

The Government is shifting its thinking to help people better understand their options

A common goal I share with the industry is to ensure consumers are well informed and engaged with their pensions savings. My grandfather left school at 14 and worked all his life (save for a World War 2 service) for the same company, retiring at 65.

But those days are gone now. People move jobs, live longer and need to plan more.

Over the past few months, I have been working on a number of measures that will support consumers engaging with their savings and help them better understand their options.

The Single Financial Guidance Body is progressing, with the Bill expected to finish its journey through Parliament early next year. This will mark a complete shift in the way we provide guidance; no longer looking at each stage in life separately but viewing finances holistically instead.

After all, pensions and retirement savings are not something anyone should be turning their attention to in later life. They are something we should be considering every step of the way. This is one of the reasons I am a fan of the midlife MOT.

Our ambitious plans for the pensions dashboard will also help people better understand their retirement savings and make informed decisions about them.

At the Department for Work and Pensions, we know through the “Check Your State Pension” service and the Pension Tracing platform that consumers have an appetite for online services.

When we talk about planning for retirement, we are always clear that both state and private pensions have a role to play and that planning ahead is key, so the logical next step is to bring this information together in a clear and accessible format.

Many in the industry are already doing this to some degree, with some fantastic platforms out there that help consumers stay in touch with their savings.

But the reality is that most will have more than one product or pot of savings, and bringing them together is the key to helping them truly plan ahead with an accurate picture.

This project is certainly not one we can do alone and over the coming months we will be working with the industry to get your thoughts on what should be included and how we can make it as useful for consumers as possible.

The industry also has a role to play in ensuring greater levels of transparency so people are aware of where their money is invested and any charges they will be paying to access their pension pot.

The latest pension charges survey showed the vast majority of eligible members are paying well below the 0.75 per cent cap introduced by the Government, which goes to show how the industry is responsive and embracing the challenge.

However, the survey also showed a clear lack of transparency on some costs in pension schemes.

As a result, we have developed a number of proposals on which we will be working with the industry, including requiring that members’ annual benefit statements explain where they can find the costs and charges for their scheme.

This will ensure savers will also be able to access information about where their money is invested, opening up the possibility of people consolidating their pension pots in a scheme better suited to them.

The publication of charge and transaction cost information will enable scheme trustees and others to compare the value for money they are receiving with their peers, driving better market outcomes.

To ensure this information is truly accessible, we are asking schemes to publish an illustration of the compounding effect of the costs and charges affecting their pension savings.

These changes will not support consumers if they are tucked away in the small print so we must all think about how they can best be presented to make the information meaningful.

As we near the end of 2017, I would like to take this opportunity to wish Money Marketing readers a Happy Christmas and thank you for your engagement and support over the past few months. I look forward to hearing your thoughts and working with you closely on projects like the dashboard in the new year.

Guy Opperman is minister for pensions and financial inclusion

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Talking a lot of sense although just for the record MM, this link was delivered to my email Inbox as: “Pensions Minister talks bo……”
    Quite the reverse, as it turns out.

  2. Not that anyone will take any notice of any ideas put forward by practitioners.

    These statements by politicians are always full of confidence but are in effect flim-flam if not outright nonsense.

    To start with AE is boring for most. They don’t get individual advice and are dragooned into a one size fits all. Who on earth can that encourage anyone to engage – let alone spark any interest? Reducing take home pay on a compulsory basis engenders antipathy – not enthusiasm. Many regard it as just another tax.

    Look at the paperwork that is handed out. Employees merely lose the will to live after they have read the first two sentences. Stupid adverts with giant cuddly toys are nothing more than condescension.

  3. For starters:-

    1. Scrap the LTA.

    2. (At least) double the AIA.

    3. Restore Contributions Insurance.

    4. Restore Pension Term Insurance (subject to a minimum level of ongoing contributions to retirement benefits).

  4. My understanding is that AE primarily provides a basic product for those with little previous engagement.

    People who are affected by contribution limits will largely be the more financially aware customers.

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