Research reveals 'huge pitfalls' of pension abbreviations

An "overwhelming" 74 per cent of savers couldn't identify any common pension abbreviations in new research from Aegon, which has prompted calls for more understandable communications on pension issues.

Aegon argued that there are "huge pitfalls" surrounding the use of pension acronyms and initialisms, noting that while these may be commonplace in the financial services industry, they can often lead to confusion given the widespread lack of consumer understanding.

Indeed, the survey found that only 2 per cent of people knew that ESG meant environmental, social and governance, while even fewer knew the initialism for annual allowance (AA), money purchase annual allowance (MPAA), or state pension age (SPA).

Sipp was the most well-known acronym amongst those tested, although even then, only 8 per cent of respondents were able to identify that it stood for self-invested personal pension.

Commenting on the findings, Aegon pensions director, Steven Cameron, stated: “The financial services industry is not alone in loving an acronym, but that love isn’t shared by consumers.

"Our industry needs to take note. Providing clear and understandable communication is extremely important when it comes to explaining financial products and services.

"We shouldn’t underestimate the power of using everyday language as it can make a huge difference between confusing or helping people to better engage with their pension and make informed decisions.

“The financial services industry is very focused on demystifying pensions through communications designed to boost engagement and explain the basics.

"The first cross-industry ‘Pension Attention’ campaign has kicked off this autumn, including the annual Pensions Awareness Week, which should help to connect more people with their pension.

"Pensions can often seem daunting for those who don’t know where to start, so it is important that the industry cuts out confusing acronyms and truly engages with individuals with clear language.”

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