Advisers say the simplest elements of pension illustration documents are still too confusing for a lot of clients.
One adviser described how he showed a client the classic 5-7-9% table projecting how much his pension could grow under different investment conditions.
After some thought, the client said: "I'll have the 9% one, please."
If clients struggle to understand this relatively simple concept, how will they understand the reams of literature the Financial Services Authority (FSA) insists providers send?
This argument has been had before, but now, the Department for Work and Pensions (DWP) is suggesting total transparency is actually counterproductive in encouraging people to save.
In its terminology guide produced for employers embarking on auto-enrolment, the DWP said: "Research found giving too much detail, such as the exact percentages... caused confusion.
"People were interested to hear there are minimums and wanted to know if their workplace pension scheme met or exceeded those minimums, but didn't find the actual percentages helpful."
This part of the guide was referring to phasing, which is the gradual increase in employer and employee contributions to pension schemes starting in 2012.
However, the concept is universal; people do not want the inside leg measurement of their pensions, just the headline figures.
If this is the philosophy coming out of the DWP, what are the implications for the FSA, which is enamoured with transparency and in the process of imposing yet more disclosure requirements on SIPP providers through the consultation paper CP 11/03?
|DWP guidance on delivering pension info
1) The employee must feel they are in control - in fact, DWP studies found even the words "auto-enrolment" made employees feel railroaded and recommends the phrase is avoided.
2) Make it clear what's in it for the employee
3) Make it relevant to the employee
4) Make everyone's roles clear - including the government, the employer and the employee
5) Overcome contextual barriers - this basically means bust the myths around pension savings
6) Make the information accessible - this means present text in small, manageable chunks, with information tiered to meet needs, and use diagrams, case studies and images
7) Establish basic knowledge and confidence - ensure the employee understands and is comfortable using pensions terminology
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