13th June 2016 When is a spade a portable soil transportation device?
By Anne-Marie Winton, Partner.
It has been said that learning about pensions is like learning another language – a very difficult language. And if the Bank of England’s Chief Economist is prepared to admit that he cannot “make the remotest sense of pensions”, then the barrier to understanding for anyone without a master’s degree in economics clearly is incredibly high.
Part of the problem is surely the vocabulary and grammar structure of the pensions language. In April, the ABI launched a consultation on simplifying the language of retirement options: “Making Retirement Choices Clear”; the NEST phrasebook (in multiple editions) has sought to define commonly used pensions terms, and various other esteemed authors have made valiant attempts to de-jargonise the jargon routinely used in the industry. But are – or indeed, can – any of these efforts good enough?
In March 2014, the Department of Work and Pensions commissioned research to find out what people thought about workplace pensions in general and also automatic enrolment in particular. At that time the “We’re all in” multi-media advertising campaign was running, though Workie had yet to be born and was still a ball of fluff in an advertising agency’s storeroom. Around half of those surveyed thought that a “workplace pension scheme” was a good thing for them personally, and 8% said that they would never save into a workplace pension. The survey also looked to discover whether the advertising campaign around automatic enrolment was helping making pension saving a social norm. Broadly the most common outcome on seeing or hearing advertising was chatting to family and friends, but seeking advice or approaching their employer or even going online barely registered as outcomes. So it seems that the social norm of going online for information about the latest information about Game of Thrones or the Kardashian family is not apparently a social norm for seeking information about pensions.
What I rather suspect is the lack of engagement directly correlates to the language used to describe workplace pensions saving (and the lack of blood and selfies). And if you are lucky enough to have been a member of an occupation pension scheme, confusion is no doubt generated by the change in terminology over time. Terms used in the members’ booklet you received on joining may be very different to those in use now: for example, a tax free cash became a pension commencement lump sum and then an uncrystallised funds pension lump sum – or taking “cash in chunks” according to Pensions Wise (which has the virtue of blunt simplicity though little linguistic elegance).
As a pensions lawyer I have been trained to avoid certain words; using “guarantee” to describe a defined benefits promise may be a hostage to fortune. And “deficit” can mean widely different things, depending on the method and date of calculation.
So seeking simplicity in pensions language is perhaps the Holy Grail. Looking for synonyms to try to find clearer ways of defining pensions terms shows the difficulty and can generate absurd results: is defined contribution really the same as a “described bestowal”? Or are defined benefits better described as a “delineated perk”?
The Pensions Dashboard – if it comes into force – is going to be the acid test of explaining pensions. A picture may say a thousand words, but in pensions, we need the words too.
Read the article, titled ‘We need to get rid of pensions jargon’ in Professional Pensions here.
The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. ARC Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.