Simpler annual benefit statements for workplace pensions
We support the aim of this consultation in trying to achieve greater consistency in, and simplification of, individuals’ pension benefits statements but highlight that pensions planning cannot be undertaken without understanding the tax implications both during accumulation of savings and at decumulation (drawing a pension). Any project must take tax into account.
We specifically recommend that:
- If there is to be a pension ‘statement season’, tying this in with the tax year end could help people to cross check pension contributions in the past year for tax compliance purposes;
- Paper statements should be preserved for those who want them, safeguarding the digitally excluded or those struggling with digital engagement;
- Clear links to pensions dashboards should be made from annual statements. However, we reiterate that such messaging would be simpler if there were to be just a single, government-sponsored dashboard rather than a multiplicity of them;
- Statements need to flag that pension income on retirement will be taxable (except for pension commencement lump sums) and prompt people to consider their state pension (which is also taxable) in the round with private pension savings;
- Statements should clearly show the net-of-tax-relief cost of pension contributions, making them seem more attractive and therefore prompting people to save more.
Our submissions can be found here: Simpler annual benefit statements for workplace pensions – LITRG response