Understanding pensions just got easier

Do you know what a wake-up pack is? Didn't think so. It's something you only get when you're coming up to retirement.

Wake-up packs are sent out by pension providers when there members are approaching the retirement age they put down on their forms when they started paying into their pension.

It pretty much universally agreed that wake-up packs are useless, they're about 16 pages long with about one page of useful information hidden among the endless industry jargon and warnings - you'll probably find them thrown in the backs of kitchen drawers.

So in a rare moment of common sense, the Treasury along with insurer LV= has been trialling a pension passport as a replacement to the wake-up packs and they're surprisingly simple, and dare I say it, helpful!

The one page passport tells you what pension scheme it refers to, how much you have saved and any other additional information that is worth noting such as whether you have a guaranteed annuity rate or other perk.
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'Pension dashboard'

This is a brilliant initiative to replace what is purely an exercise is wasting paper but we can't stop with the passport. The new passport is to be sent to those nearing retirement, what we really need to engage people in savings is to keep them updated on their pension progress through their working life.

The government has already said it plans to develop a 'pensions dashboard' that will allow you to see all your pension savings in one place, and this advancement can't come soon enough.

If we want people to engage with pensions they have to be able to see, in clear and plain English, what they are engaging with. It is often said that people start to be interested in their savings when it equates to a year's salary and at certain life milestones, such as turning 30 or having a baby.

The pension dashboard needs to be able to take these things into account, promoting people to get on board the savings train at these trigger points and engaging them at a much earlier age.

We all know the key to a good retirement is saving early and saving consistently but I would argue that having access to the right amount of information about your savings is also crucial. No one wants to be bombarded with paper and jargon but seeing a nice big figure online will surely encourage us all to save more.

Read more:

Pension changes warning as millions could run out of cash

Beat the system: annual spending traps and how to avoid them

Old vs young: a new battleground for pensions inequality