What are the new pension "wake up" packs?
Just when you thought you were getting to grips with the intricacies of your pension planning, yet another change to the rules comes along.
On this occasion though, you are likely to view the change as very good news, since it comes in the shape of new “wake up” packs that tell you more of what you need to know about the current state of your pension.
“Wake up” packs
The concept of “wake up” packs was first raised by the government back in January 2015, when it committed to improving the quality of guidance provided to pensions savers.
The packs have been sent out to everyone some four to six months before they are scheduled to retire. Although they set out the many options available to savers since the introduction of the current pensions freedoms, the packs have typically involved lengthy and relatively complicated documentation, explained an article in the Express newspaper on the 25th of October 2019.
With effect from the 1st of November 2019, pensions providers are now required to ensure that the “wake up” packs continue to convey essential information about an individual’s pension and pension options, but:
- the documentation must be considerably shorter and easier to read; and
- packs are sent out on the individual’s 50th birthday and then at least once every five years until their pension pot has been completely used.
Simplification of the documentation means that the new “wake up” pack must include a summary no more than one page long which summarises:
- the current state of their savings;
- how to access the official Pension Wise website; and
- the pros and cons of different pension income options – such as the purchase of an annuity compared to drawing down funds from the pension pot.
In the one-page discussion about pension options, the information must also present:
- the likely risk factors relevant to the individual's age;
- the date they plan to retire;
- the amount of their pension savings, tax liabilities and implications, investment risks, and known pension scams.
“Wake up” packs containing this information are designed to alert people to the possibility that they currently may not be saving enough to achieve the retirement income they want. If this is the case, they will be encouraged, therefore, to consider the actions that can be taken relatively quickly to get their pensions aspirations back on track.
So, the new-format “wake up” packs are designed to help prevent people “sleepwalking” into retirement – as a correspondent in the Daily Mail on the 25th of October put it.
The new packs are sent to the over-50s who are members of their employer’s Defined Contribution pension scheme – where employer and individual contributions are invested in a pension fund run by a third-party provider.
The packs are not sent if you belong to a Defined Benefit – or final salary – scheme which guarantees your level of income upon retirement. But you do receive updates by way of statements on the value of your savings and what you can expect to receive when you retire.
Naturally, Independent Pension Specialists will contact you every year leading up to your planned retirement date to provide, where required, guidance and advice on your retirement planning. We will also be able to assist you and explain the options available to you when you decide to put your pension(s) into payment.
The data and information cited in this article are correct at the time of writing.