Pensions jargon isn’t just confusing for workers, it’s one of the reasons they give for not saving for retirement.
Recent research carried out for NEST by YouGov showed that one in three people are put off thinking about saving for retirement because they find pensions confusing. This is a worrying finding, particularly when later this year millions of workers are due to start saving for their retirement for the first time through automatic enrolment.
NEST is the UK’s new national workplace pension scheme that’s designed for people who are largely new to pensions and saving, and the organisations that employ them. We’re the only UK pension scheme that has a public service obligation to say ‘yes’ to any employer that wants to use us. And we’ve been designed to be easy to use for our members, and their employers.
It’s expected that NEST will have millions of members and we want to make sure the way we communicate with them is clear, easy to understand and helps them feel confident about saving for their retirement with us. We hope and expect this will also make life much easier for employers who use us, who will be less likely to face questions from confused workers.
Now we’re certainly not the first to point out that pensions aren’t renowned for jargon-free communications, but what NEST has done is carry out wide-ranging research with people who are new to pensions and saving. You can see the results of this work in the latest version of our phrasebook and we’ll use these ‘rules’ in all our communications to members and their employers.
The phrasebook features a list of user-friendly terms and phrases we believe will work better than existing jargon for savers because they’ve been designed with and for them. Let’s look at a couple of examples of pensions jargon that we’ve either changed or simply got rid of.
How might you try to come up with something clearer than pensions industry favourite ‘annuity’? As a result of our research with likely NEST members, ‘annuity’ becomes ‘retirement income’. As well as changing the term, we found we should add a description: ‘a regular income stream for the rest of your life’.
How about another piece of jargon not likely to roll off anyone’s tongue: ‘trivial commutation’? In the phrasebook, this simply becomes ‘taking your retirement pot as cash’. People with NEST retirement pots worth less than £2,000 or with total retirement savings of less than £18,000 might be able to take this money as a cash lump sum instead of buying a retirement income’.
NEST will continue to develop and add to our phrasebook. We’re committed to helping make it easier to keep workers saving for retirement and making it easier for employers to comply with their new duties.