With the introduction of pension freedoms introduced in 2015, the FCA introduced a number of measures to help savers make decisions around their pensions and prepare for retirement.
One of the measures the FCA introduced was the new wake-up packs, aimed at ensuring savers receive timely, relevant and adequate information about the options available to them at retirement to enable them to make an informed decision about accessing their pension savings. Our latest insight looks at what workplace pension providers include in their wake-up packs.
Workplace pension providers are required to send a wake-up pack to their members within two months of the member reaching the age of 50. Before 2019, members only had to be sent a pack around 6 months before their planned retirement date.
Our data shows that all workplace pension providers provide and issue wake-up packs as standard.
Aegon Master Trust and Aegon Workplace ARC issue their first welcome pack 12 months before the member turns 50. Standard Life, Standard Life DC Master Trust and True Potential issue their packs two months before the member turns 50. Other providers issue theirs one month before the member turns 50. Aviva My Money Master Trust and Fidelity have not confirmed their answers.
Following the original pack, workplace pension providers must send additional wake-up packs between 4 and 10 weeks before the client reaches each birthday at 5-year intervals after the clients 50th birthday, i.e. a pack every 5 years.
Scottish Widows, Scottish Widows GSIPP, and Scottish Widows Master Trust issue the additional packs 3 months before each 5-year deadline. Standard Life, Standard Life DC Master trust, True Potential and Hargreaves Lansdown issue theirs 2 months before. Other workplace pension providers issue theirs a month before each deadline. Aviva My Money Master Trust and Fidelity have not confirmed their answers.
The FCA also recommends wake-up packs are sent out to workplace pension members when a member asks for a pension quote, between 4 to 6 months before the member’s planned retirement date, and any time the member takes money out of their pension pot.
In an attempt to move away from the long confusing documents filled with pages on information mandated by the regulator in the past, the FCA has attempted to keep wake-up packs simple. The regulator said the packs should ideally include a single page summary document, a fact sheet, appropriate retirement risk warnings, a statement about whether any guarantees apply (and if so, how they work), and any other relevant information that is required to enable to member to make informed decisions about their options.
Our data shows that all workplace pension providers have chosen to interpret what should be included in a wake-up pack differently.
However, there are some elements that all of the wake-up packs provided by workplace pension providers have in common. All of the wake-up packs include an explanation of the different retirement options available to the member, an explanation of the different ways to take retirement income, the members selected retirement date, total fund value, and appropriate retirement risk warnings
Most also include a single page summary document. Only those from Aegon Master Trust, Aegon Workplace ARC and Aviva My Money Master Trust do not.
When it comes to what information is included around annuities there is also quite a lot of difference between providers.
All wake-up packs provided by workplace pension providers include an explicit explanation of the open market option including a shopping around guide, an explicit explanation of the possibility of receiving a competitive annuity quote should the open market option be utilised, and an explicit explanation of the possibility of receiving a competitive annuity quote in the open market option with specific regards to their personal ill health or lifestyle history.
The least commonly included item is an annuity application form which is only included in the wake-up packs from Aegon Master Trust and Aegon Workplace ARC.
When it comes to what medical information is included when it comes to specifying which conditions could benefit from enhanced rates in the open market option for annuity quotes and illustrations included in wake-up packs, most providers cover a wide range of health conditions and lifestyle choices. However, Legal & General and Legal & General Master Trust only take height, weight and smoker status into consideration.
One area where all workplace pension providers are consistent is referring members for further information.
Our data shows that all providers direct the client to a link of their website for further details on their at retirement choices. All providers also direct the client to an appendix and/or attachment for further information on their at retirement options. They also all direct the client to seek financial advice should it be required and also include the Money Advice Service leaflet.
With all workplace pension provider wake-up packs including the member’s selected retirement age, it would be reasonable to expect an indication of the timescale for the retirement process to be included. However, our data shows that whilst most providers offer this as standard, the wake-up packs from Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Legal & General, Legal & General Master Trust and True Potential do not.
The greater frequency of wake-up packs since 2019 is meant to ensure that workplace pension members receive earlier warning and more frequent reminders of what their options are at retirement. The FCA aims to ensure consumers make better informed decisions, not only about their pension at the point of retirement, but also about saving in the years leading up to retirement.
With so many facing financial uncertainty, and potential early retirement, due to the Coronavirus pandemic it is more important than ever that workplace pension members are able to engage with their pensions regularly and well in advance of their planned retirement age.
Overall, our data shows that workplace pension providers have engaged well with wake-up packs, and are utilising the opportunity to help their members engage with their pension.
However, it is worth noting that the wake-up packs from Aegon Master Trust, Aegon Workplace ARC and Aviva My Money Master Trust are the only ones that do not include a single page summary document which is a key element of the recommendation to what should be included from the FCA.