Is it time to redesign pension statements? Well, maybe in the UK at least. Half of all company pension scheme members in the UK spend less than 10 minutes reviewing their annual pension benefit statement, according to research from Watson Wyatt. Some 84% of defined contribution plan members and 72% of defined-benefit plan members believe more could be done to improve the usefulness of their benefit statements.
"Many people would study household bills, including telephone, electricity and gas statements harder than their annual benefit statement. It would seem the immediacy of saving a few pounds takes precedence over a long term and potentially life-altering financial decision. The annual benefit statement is, for most people, the main piece of pension communication they receive each year and should serve as a trigger for action," says Gary Smith, a senior consultant at Watson Wyatt. "While some individuals may be happy with their arrangements, I'm worried that others are finding the information either too complex, too technical, too dull or simply not helpful enough to hold their interest and ensure they make the right choices about their retirement provision."
According to the Watson Wyatt research, of those defined-contribution members who spent fewer than 10 minutes reviewing their statement, 90% subsequently did nothing to change their arrangements, although about one in four said this was an "active" decision not to make changes; they were happy with their current situation. Among DC members who took more than half an hour reviewing their benefits statement, unsurprisingly there was a greater likelihood of change. Some 19% decided to change contributions and 18% decided to change their investment fund choices.
The Watson Wyatt survey found defined-benefit members to be happier with their benefit statement than DC members. This difference is pronounced and remains even after controlling for members' age, gender and income. The areas most often cited for improvement were "more guidance on what to do" and "more explanation of what the figures mean." Only 16% of DC members said to do nothing – that the statement is “good as it is.”