Yesterday a financial journalist called about a confusing e-mail she had seen showing changes to a friend’s pension plan The letter was trying to explain how the friend’s fund management would change – to give her freedom and choice in spending her savings.
Here is the original;
Changes to your XYZ GPP Default Fund Strategy
Following the changes in pension legislation with regards to pension freedoms it is becoming clear more people are no longer purchasing annuities in such quantities as has historically been the case. An Annuity was previously the most common way in which you could secure a pension income for life with an Insurance Company.
The current XYZ GPP Default Fund Strategy is an Annuity Targeting strategy. Scottish Widows Investment Governance Committee and our own XYZ Governance Committee feel this is not a safe assumption for members any longer, and seek to change your current default fund to target Flexible Access. Flexible Access allows members to choose how they wish to draw their pension funds through retirement.
The only difference between the two investment strategies is what happens to your pension fund 5 years before your chosen retirement date, (normally age 65), with the new approach keeping more of your fund invested. The graphic below displays the asset mix of your current default strategy and your future strategy at your normal retirement date:
As you are more than 5 years from your plans Normal Retirement Age and because you have yet to enter the latter stage of the retirement glide path your pension fund will change to target Flexible Access from June 2017. Please note this will not affect your asset mix or risk profile of your pension scheme until 5 years from your Normal Retirement Age and there is no change to the plans charges.
Further details on this change will be sent to you directly from Scottish Widows to your home address during May. This letter will explain the changes in more detail and also gives you 60 days to consider and inform Scottish Widows if you do not want to proceed with the change to the new default strategy in June.
Here is my translation
A change to the way your pension money is managed (as you get older).
This is to do with the management of the money that xyz pay into your Scottish Widows Group Personal Pension (GPP for short)
In the past, you swapped your pension savings for something called an annuity. This paid you a guaranteed income till you died. In 2014 George Osborne brought in “pension freedoms” which mean you can now do what you like with your pension savings
Your pension savings are managed by Scottish Widows, their “independent governance committee” suggest they change the way your money is managed as you get older. The Xyz Governance Committee agrees with their idea.
So from June 2017, Scottish Widows will manage your money differently as you get close to the end of your career. (If you haven’t told us differently, we assume that you will want to start spending your savings at 65).
In the past, Scottish Widows would have managed your savings to help you buy an annuity. Now they will manage your money to help you keep your options open.
The earliest you can start spending your money is 55- if you want to have access to start spending your pension money from before 65, tell us and Scottish Widows will manage money to suit you.
If you don’t know when you’re retiring, sit back. When you get to 50 you can have a conversation about all this with a pension expert from the Government’s Pension Wise team. They can give you guidance on what to do.
Remember – the longer you hold off spending your savings – the further your savings will go!
If you are interested in investment, the diagram below shows you how what this change will mean to the way your money is managed by Scottish Widows before and after the changes.
“Annuity Targeting” means helping you to buy an annuity and “flexible access” is the technical term for “keeping your options open”. Annuity is before and flexible access is after the changes.
If you don’t like either way of managing your money, you can choose a do-it- yourself approach. You can either do this with the help of a financial adviser (who may charge you) or without. Be careful – managing your pension money needs skill and experience.
Scottish Widows will be sending you more details on all this to your home address. If you don’t want these changes to happen, you’ll be able to opt-out. If you want to tell Scottish Widows you want to take your money earlier- or later – than 65, now would be a good time. If you want to do the management yourself, now is a good time to take charge.
You’ll have 60 days after you get the letter to tell Scottish Widows what you want, but if you are happy with the changes, you won’t have to do anything.
The original may be compliant it is “bad language”.
I won’t expose the EBC (as this might compromise the employer and my source). I have urged the journalist to campaign against shoddy communication.
I am sure that the original is compliant and my version isn’t, but if we continue to pump out badly written garbage to thousands of people at a time, is it any wonder that pensions get a bad name.
The EBC claims to be good at talking to staff and I know it can be, but this is not good – this is rubbish – we expect and demand better. I do hope that the journalist who works for one of the top papers in the land, will pursue this.
Similar examples of pensions bad language can be put in the comments boxes below!
It is difficult to accept that today we are still having to rant against such an unprofessional approach to good communication. I spent the best part of the forty years I was in the Pensions industry ensuring that all communications were readable and easily understood. I won many awards for communication and was never afraid to get in front of my members to ensure that I could explain everything that was changing in their pension scheme.
Your redrafting of the letter is what I try to do verbally and face to face with clients,
When I became an adviser in 1992 (Independant) we had 1 sided Terms of Business and 2 sided key features documents and then a 1 or 2 sided illustration. We then had a 1 sided reason why letter. (so 5 pages of A4 which must be read and a product brochure, terms and conditions which didn’t have to be, but was wise to)
By 2007, we were issuing probably over 100 pages for EVERY product we reccomended, so when I took on a blind client and an illiterate client and we started to have refugees appearing whose first language wasn’t English, I realsied that written communication was hiding the important facts and had become a backside covering excercise, so I wrote to Lesley Titcombe I think it was to ask if audio files of fact finds, suitability reports and other documents were acceptable bearing in mind that the consuemr ACTS on the words which come out of the mouth of the person they Trust and NOT based on the small print.
I have a copy of the leter accepting that audio files could be viewed as an accptable durable medium, based on my argument that insiting on thw written word was actually in breach of the Disability Discrimination Act…. they didn’t like havingt o agree with me….. but then they never do as with the mention of the 15 year longstop in our company’s client agreements explaining that whislt the FOS may (try) and decide on cases in excess of 15 years, if the firm fails, then the FSCS is the last resort for the consumer, but they DO apply the longstop, so NOT to tell consumers about it when your a Ltd company wouyld by unclear, unfair and totally misleading and give a false sense of security.
My word is my bond and the best way to cover your a@@se is to do the right thing for your client and use different methods to explain things to different people and Swids explanation wouldn’t work for ANY of the group pension scheme members I have ever dealt with, they’d all have phoned me and said what the **ck is this all about Phil.
A lot of my clients were in Engineering firms, manual trades, or ex services, hence the language 🙂
Unfortunately communication can regress as well as progress Graham. PensionWise and TPAS , NEST and many other workplace pension providers write beautiful plain English, unfortunately, there are many instances of bad communication. This one is unfortunately exposing pensions to negative scrutiny as its being sent to professional communicators!. I wonder whether compliance departments think beyond the end of the COBS rulebook.
Yuck. It sounds like the company was having a ‘pissing against the wall’ completion to see which Marketing Exec could get the most drivel into a pensions paper.
The investment strategy looks a bit ropey too.
Now we have flexibility about how retirement savings are used, a default switching strategy doesn’t work. The example above isn’t right for someone who wants to take the entire pot as cash, it’s not right for someone who wants to buy an annuity and it’s not right for someone who wants to remain invested in (potentially) rewarding assets for the time being. Ideally we would stop trying to run defaults but start to engage with people to help them make their own decisions. But this is a big task, to engage with everyone.
Alternatively, the need for individual decisions would be reduced if the pension industry could reinvigorate collective schemes. The DWP could complete the regulations for Collective Defined Contribution schemes. DB pension consultants could stop discouraging employers from sponsoring DB schemes at every opportunity and instead show how DB can be redesigned to be manageable. Surely pension experts should be expert in showing how DB pensions should be done, rather than expert in shutting them down?
Damn you Benstead, you stole my thunder!
Unfortunately, this is not uncommon – despite the best efforts of many in the industry. Internal and Government jargon gets ingrained and makes it way into customer communications.
Wouldn’t be any issue with your version (in my opinion) and a good compliance team should be rejecting, from a customer point of view, language which in not fair or misleading – it ain’t fair if you use terms and language they can’t understand.