Pension firms urged to use plain English

If you don’t understand what you are being told, you’re at risk of missing out

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The Independent Online

Are you as baffled by financial jargon as me? I’ve written about money matters for longer than I care to admit, but I still have to ask experts to repeat things slowly and carefully when they explain things to me – and even after that I’m generally forced to ask them to explain exactly what many terms mean.

It’s understandable that industries develop shorthand explanations of different elements of their business if they’re discussing them all the time. It helps speed up communication.

But when it comes to using technical words outside that industry, it leads to obfuscation and confusion. And that’s a massive problem when it comes to financial services, with the pensions industry arguably the worst of the lot.

For instance, try these pension phrases out for size: “flexi-access drawdown”; “open market option”; “safeguarded benefits”. Do you understand what any of them means? Neither do I. The three phrases are some of the pension terms most confusing for consumers, according to Citizens Advice. And this is crucial because if you don’t understand what you are being told about your pension, you’re at risk of missing out on the best pension options.

The charity’s chief executive Gillian Guy points out that pensions can feel like a foreign language for many people. “A small misunderstanding about your pension can lead to a lot of confusion, and mean some consumers don’t get the best option for them,” she warns.

Many have no idea what an annuity is, for instance. But it’s effectively just the name of an insurance policy that gives you a guaranteed regular income for the rest of your life.

The charity is today calling on the pensions industry to clean up its act and make things plainer for consumers. “If the industry got rid of complex language, it would help people get on the right track towards a more financially secure retirement,” says Ms Guy.

I agree – and would love to hear your examples of confusing financial gobbledegook.

s.read@independent.co.uk

Twitter: @simonnread

 

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