He said the move will build on pensions Automatic Enrolment and give millions of pension savers a better understanding of their pensions.
While the statements will first be introduced for DC schemes they could be extended to all pensions schemes.
The two-page statements will use a consistent format and will highlight key information such as the size of the saver’s pension pot and a forecast of their retirement.
The Department for Work and Pensions says it will now develop draft regulations to introduce the simpler annual statements for defined contribution schemes used for automatic enrolment.
The simpler statements will include “a line” on costs and charges and a signpost for more detailed information elsewhere.
Minister for Pensions and Financial Inclusion Mr Opperman said: “For too long pensions have been shrouded in complexity and technical jargon, limiting people’s understanding of their savings and hampering their retirement planning.
“Simple statements will usher in a new standard for how schemes communicate with their members – vastly improving people’s understanding and engagement with their pensions.
“With more people saving for their retirement than ever before thanks to Automatic Enrolment, it’s vital they can understand what’s going on with their hard earned money and actively plan for their future.”
The statements will include:
- The amount of money in members’ pension pot
- A forecast of how much money will be saved by retirement
- Steps that could be taken to improve retirement income
The initial focus of the proposals will be on defined contribution schemes used for Automatic Enrolment but the plan could be extended to all schemes to improve “consistency.”
The launch of Pension Dashboards, an all-in-one location for pensions information, is still being worked on. The DWP says the new 2-page statements will run in parallel with Pension Dashboards.
Steven Cameron, pensions director at Aegon, supported the move. He said: “We welcome the Government’s confirmation that it will be advancing the roll-out of simpler annual benefit statements, using a common template, to members of auto-enrolment workplace pension schemes. These will complement pension dashboards and initiatives being taken by individual providers to create a step change in member engagement. Individuals need both the encouragement and the means to check they are on track for the retirement they aspire to.
“To support the Government’s preference for a ‘statement season’, it’s even more important that schemes and providers advance digital statements. A digital approach also allows individuals who want more information, such as on charges, to ‘click through’, without overloading the 2 page statements. While charge levels are important, individual members in workplace pensions can’t influence these, which is where Independent Governance Committees and Trustee Boards have a key role to play in challenging value for money.”