I was recently sent one of those plaques that you hang on the wall, which depicts phrases used by women and their ‘real meaning’.
For example, the word ‘fine’. This is actually a word women use to end an argument when they know they are right.
We all know that there is a special language that people use when they want to say one thing but actually mean another. Pensions is a little like that, words and phrases that we use that do not actually mean what they say but mean something else. This is not a recent occurrence, but it is fair to say that some of the more recent changes and phrases that have been introduced into our pensions language have quite unfathomable meanings to the normal person.
‘Net relevant earnings’ – aren’t all earnings relevant? And if they are not all relevant then why do we get taxed on most of them, if not all of them, in some way or another? And now we have ‘threshold income’ and ‘adjusted income’ to contend with. It’s not ‘tax-free cash’ it’s a ‘pension commencement lump sum’ (although it is tax free).
‘Flexi-access’ except it is not potentially as flexible as you thought it might be. Then there are the phrases that have now gone from our pensions language. ‘Protected rights’ that were not actually all that protected and, in reality, looking back now means that you are not going to get the full benefit of the new flat rate state pension, and don’t even get me started on UFPLS!
My favourite phrase, however, is the word ‘retirement’. Retirement used to conjure up visions of leaving work on a Friday with a presentation, a cheque being presented to you of your tax-free cash and some assurance that pension benefits would be in your bank account next pay day, thus ensuring there was no break in your receiving income as you transcended into retirement. Now retirement often means a phasing into your later years, accessing pension benefits but not actually retiring. Those days of receiving your tax-free cash cheque on the day that you actually retired from service are long gone.
The pensions industry has always been a jargon-filled world, so much so that those working in the industry don’t even realise it. We also seem to spend a lot of our time in this industry talking in initials and assuming that everyone understands what we mean. You can have a SSAS, a SIPP, a PP, a GPP, an IPP, an AVC, a QWPS. You used to be able to have a PRPP, but now that’s just a normal PP, and if you tried to get a TV from a WP EPP (which is nothing to do with records), you might end up with an MVR, and your GMP might be in a S32 (which isn’t actually Section 32 anymore, but that’s another story!).
And then there is a special language that older members of the pensions world might still recall. LPPD anyone?
Earlier this year, the Association of British Insurers launched a consultation and a draft guide, with a view to simplifying the language used to explain freedom and choice to savers, highlighting that communication should use language that avoids technical terms, therefore making it easier to understand.
It all sounds like a good idea, but would we manage in a jargon-free pension world? And if we do manage it, perhaps we could convince the motor industry to adopt a jargon-free language, because other than, ‘put key in and turn engine on’ – the rest is a foreign language to me!
- Karena Woodall, Wealth Management Consultant, May 2016