Former Pensions Minister Says Pensions Industry Is Sending Out The Wrong Message On Pensions

3 May 2018

Pensions Industry Is Sending Out The Wrong Message There's no doubt about it, more of us are saving more towards our retirement, mainly thanks to auto enrolment, which has seen millions of people begin saving for retirement for the first time. Writing in Money Marketing, the former pensions minister says that now it is time to build on this.

"Millions more people are putting money aside for their retirement," says Baroness Altmann, "…which could offer exciting opportunities for advisers and pension providers. But capitalising on this situation requires new thinking."

One of the areas she highlights are "wake-up packs". These, she says, are sending out the wrong message on pensions.

"Take the so-called "wake-up packs" the regulator requires providers to send out at least six months before the customer's pre-selected pension date. The packs are meant to disclose all the relevant information for customers to make the right choice with their pension pot but they are full of unfamiliar terms like decumulation, annuity, drawdown and guidance."

"What wake-up packs should tell people is how much is in their pension fund, what terms are attached to their product, how best to use their pot to last through retirement and how much regular income they might achieve. And behaviourally, it is all wrong. The message they are getting from the packs as they stand is their pension is almost over. They will soon stop paying in and can start taking money out."

A better way, says Baroness Altmann, would be to send these wake-up packs much earlier.

"Behavioural science suggests sending wake-up packs when people are eligible to take money out will nudge them towards doing so. A much better approach would be to send a wake-up "message" at, say, age 50, encouraging people to consider a mid-life MOT to review their wealth and health for their future."

  • Author Profile
    • Sp avatar Josh Pedlar

      Josh was a Business Development Manager at Smart Pension. Josh served as Smart Pension's Business Development Manager from November …