DWP Simpler Annual Benefit Statements: Draft Regulations and Statutory Guidance - Which? response

Which? supports the proposed regulations for 2-page annual benefit statements but any schemes making significant changes to the proposed template should have to evidence that their approach works.

Which? agrees strongly with the Government that there needs to be a range of interventions to help drive engagement in pensions, utilising different channels and moments. Annual benefit statements are likely to continue to be an important part of how pension schemes engage with consumers in the coming years, even for schemes that offer online services. 58% of adults with at least one defined-contribution pension recall receiving their annual statement and having read it. While this figure could be higher, it highlights that annual benefit statements have significant reach. 

Many annual benefit statements remain overly long, complex and difficult to compare between schemes. Just 25% of those who read their statement said they understood it very well. Greater simplification and standardisation can help to improve standards across the sector and ensure greater comparability for consumers when looking across their different pension schemes. Research on pension wake-up packs, for example, has shown that reducing information to a single page resulted in consumers being ten times more likely to visit the Pension Wise website compared to those receiving much lengthier documents. 

Which? believes that the government’s proposed approach will help provide sufficient standardisation between schemes, while enabling some innovation for schemes that are better placed to conduct research and testing among their members to determine the approach that delivers the best outcomes. We would expect most small and medium-sized schemes to adopt the government's proposed template virtually unaltered. For any schemes that do make substantial changes to the proposed template, they should be required to provide evidence that their statements are understandable and comparable. 

DWP should also ensure there is a continued programme of research and testing of the mandatory template, so that the template can be improved over time and that it keeps pace with other changes in the pensions industry, such as requirements for pensions dashboards. This evidence would then provide a benchmark for schemes to exceed in their research and testing of their own potential approaches. DWP should also seek to learn from what works among schemes that take alternative approaches.