The Government has committed to introducing a “pension statement season”, with all retirement savers being sent annual pension statements within a short period each year.
In this second installment, Kat Mitchell looks at the proposals and what they would mean for workplace pension providers, advisers and employers.
Some industry commentators have gotten on board with the idea, saying it would bring a degree of simplicity and regularity that could help people easier understand their retirement savings.
Others have criticised the idea as naive and unlikely to boost pension saving engagement levels. Former Pensions Minister Sir Steve Webb called it “an analogue solution in a digital world”.
One criticism is the impact on customer service to consider. With all pension statements going out within a set period of time each year, contacts are likely to be concentrated into a short window. This is likely to either leave workplace pension providers with higher customer service costs (which may be passed onto schemes and/or members) or to leave a drop in customer service levels shortly after the statement season begins.
This impact on customer service could also potentially impact advisers and employers both directly and indirectly.
Both may see a drop in customer service levels they receive from workplace pension providers whilst simultaneously dealing with a concentration in contacts from members themselves.
Many Britons, especially those with high disposable incomes or close to retirement, rely on a financial adviser to help make sense of their finances. Annual benefit statements can be an important part of regular review meetings between financial advisers and their clients and should these all now be sent within one short time period, advisers may find many of their clients all looking to book their regular review shortly after the new statement season.
Others have criticised the proposed pension statement season, saying that it could leave more pension savers open to fraud. By all providers sending out statements within the same window, it could make it easier for fraudsters to impersonate providers and advisers by contacting savers claiming to needing to discuss the recent statement sent.
However, whether or not they are a good idea, it seems pension statement season may go to ground before it ever really got started.
A new report from the Work and Pensions Select Committee has called for the Government to drop any plans for a statement season if the benefits cannot be clearly demonstrated.
The report said the idea of a statement season would add extra paperwork without any obvious consumer benefit.
The report from the Committee is part of the first review of the Pension Freedoms which were introduced in 2015.
It said: “A pension statement season would be a short period each year when schemes were required to send savers annual pension statements. We are not convinced that the gains from a statement season will justify the complexity of introducing it. In our view, the measure is at best a stopgap until pension dashboards are available.
“Given the likely cost and disruption to the industry, we recommend that the Government be prepared to adapt or drop its proposal for a pension statement season if the benefits cannot be robustly demonstrated.”
Whilst the idea of a pensions statement season may never really get off the ground as a result of this report, advisers and employers still need to get ahead of the game in case they get the go-ahead.
By asking workplace pension providers what plans and procedures they have in place should the statement season become law, they can best assess what the likely impacts are to be on their customer service levels and communications and make sure they are in the best place to make their own preparations should the time come.
Benefits Guru will be asking providers this question and we will share the responses in a future insight.