Is it possible to remove the jargon from pensions?
It was my first time on the radio and, faced with the daunting prospect of answering pensions questions from listeners alongside a true pensions expert, I was rather nervous.
With seconds to go before the red ‘on air’ light illuminated, and my heart rate racing in anticipation of my first live broadcast, the presenter cautioned us to avoid using jargon in our answers.
I managed to last about 20 seconds before spouting my first bit of pension jargon, quickly explained in plain English before repeating the sin time and time again over the course of the next hour.
I was reminded of this experience when I saw this week that the Association of British Insurers (ABI) is attempting to remove the jargon from pensions.
They have published a new guide to pensions language which they claim could see the end of jargon terms such as ‘uncrystallised pension funds lump sum’ and ‘flexi-access drawdown’, both of which have been regularly used since the introduction of pension freedoms last year.
Co-ordinated by the ABI, with the support of the pension industry, Government and consumer groups, the new guide aims to make pensions language simple, clear and consistent in order help customers better understand their options at retirement.
According to the ABI, many people find the new retirement income choices confusing, and across the long term savings sector, different terms are used to describe different retirement income options.
Their guide aims to standardise the language used by pension providers and others in the sector so customers can understand and compare pension products more easily without having to decipher technical terms.
The ABI guide, which is called ‘Making Retirement Choices Clear’, proposes the new retirement income options introduced this time last year should instead be referred to as:
-You can keep your pension savings where they are.
-You can take your whole pension pot in one go.
-You can take your pension pot as a number of lump sums.
-You can get a flexible retirement income.
-You can get a guaranteed income for life.
-You can choose more than one option and you can mix them.[tweet_box]Are pensions filled with too much jargon? Some ideas for simplifying them right here.[/tweet_box]
To support the publication of the guide, the ABI made reference to some consumer research by Money Advice Service and ComRes.
This research found that terms such as flexi-access drawdown, fund, and uncrystallised pension funds lump sum are too confusing and should be avoided.
At the other end of the spectrum, they found that some terms such as ‘taking cash’ or ‘chunks’ from your pension are considered by consumers to be too informal.
The research also found that information about tax and fees should be mentioned explicitly and up front.
They found that people want pensions language to encourage them to take responsibility for their finances, but it should not be alarmist.
These are all really good points and we agree with them wholeheartedly.
The publication of the ABI guide is just the start of their campaign to remove the jargon from pensions.
They have formed a Pensions Language Steering Group and are consulting widely to gather more views.
It will be interesting to see how well the pension industry is able to adopt this work and remove jargon from pensions.