Experts in the industry have joined forces to produce a guide to make pension language simple, clear and consistent in order to help customers better understand their options for retirement.
Co-ordinated by the Association of British Insurers (ABI), a Pensions Language Steering Group was formed to develop simple and consistent language. The group involves leading figures from the pension industry, the government, regulators and consumer groups.
Many people found the new retirement choices 'confusing', and across the sector, different terms are used to describe options, according to the ABI.
The guide aims to standardise the language so customers can understand and compare products more easily without having to "decipher technical terms".
Yvonne Braun, ABI's director of policy, long term savings and protection, said: "Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it's important that we make these options as clear and comparable as possible."
Based on research conducted by the Money Advice Service and ComRes, the ABI found terms such as 'flexi-access drawdown', 'fund' and 'uncrystallised pension funds lump sum' were too "confusing and should be avoided". Phrases such as 'taking cash' or 'chunks' were seen as "too informal".
The study also revealed information about tax and fees should be mentioned "explicitly and up front". Additionally, language should not be 'alarmist' but should encourage people to take responsibility for their finances.
For the guide and the language to be consistently applied across the sector, the ABI is consulting more widely to gather views, including from media and consumer organisations.
Braun stated: "We need the wider sector to contribute to the consultation and implement the guide so that simple language can be used consistently across the whole market and by all those talking to people about their retirement income options."
Tomorrow the ABI will officially launch the consultation, which will run until 19 June.
