This week will see the first 'pension passports' being sent out to retiring savers. The pilot scheme, operated by the insurer LV= with the full backing of the government is to help simplify the information people receive when approaching retirement.
Currently, regardless of who their pension pot is invested with, people are often sent piles of paperwork which can both be confusing and overwhelming. The new pension passport that is being trialled will be one single document that will spell out clearly what benefits you are entitled to in your pension. It will also encourage people to use the services of Pension Wise, the Government's free service for the over 55s offering advice on their retirement benefit options.
The idea behind the scheme is to give savers clear and straightforward information about their retirement benefits. This in theory should help them maximise their pension pot dependent upon their needs and lifestyle choices. Currently, many people do not engage properly with their options due to the complexity and technical nature of the paperwork sent to them, which can be overwhelming.
Phil Brown, who is the head of LV= head of retirement proposition and change said "We are sending these to those pension savers approaching retirement in place of the current wake-up packs.
"People spend a lifetime building up their pension funds and we want to encourage them to make the most of their pots."
"The pension changes means that those pension savers now have greater choice as to how they take an income from their pots and we have been working with the Cabinet Office's behavioural insight team to ensure that the information we provide is sufficient enough to encourage them to shop around for the right solution or combination of solution for their needs."
The pilot scheme will be monitored carefully by the Treasury, to see how successful the new pension passports are, if customers do prefer this new clear and transparent format and whether it does lead to people making better decision about what to do with their pension pot. With more and more people expected to retire with a workplace pension due to the current roll-out of auto enrolment pensions, it's expected that pension passports (or another similar format) will eventually replace the current complicated packs issued across the pension industry.