Terms such as ‘uncrystallised pension funds lump sum’ and ‘flexi-access drawdown’ could be phased out if a new guide to make pensions language simple, clear, and consistent is adopted. Co-ordinated by the Association of British Insurers (ABI), with the support of industry, government, and consumer groups, the guide aims to standardise the language used so that customers can understand and compare products more easily without having to decipher technical terms.
Consumer research found that a lot of the terms used are too confusing and should be avoided.
Some terms, such as ‘taking cash' or 'chunks' from your pension, were seen as too informal. Additionally, it was recommended that information about tax and fees should be mentioned explicitly and up front.
The research found that people want pensions language to encourage them to take responsibility for their finances, but it should not be alarmist.
The ‘Making Retirement Choices Clear’ guide proposes the new retirement options be explained 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.
ABI director of policy, long term savings and protection, Yvonne Braun, said: "The industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them for their retirement.
“Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it’s important that we make these options as clear and comparable as possible.
“This guide to making retirement choices clear could make a real difference by helping people to better understand their options. But we need the wider sector to contribute to the consultation and implement the guide so that simple language can be used consistently across the whole market and by all those talking to people about their retirement income options,” she said.