Is simpler better?

Jenny Holt / March 2023

Is simpler better?

09 March 2023

As of 1 October 2022, any benefit statements produced by auto-enrolling defined contribution schemes have to comply with the regulations for Simpler Benefit Statements (SBS). That means including particular information and – crucially – doing so in no more than two sides of A4 (or digital equivalent).

Since many schemes don’t have their year end until 31 March or 5 April, SMPI statements don’t tend to be issued until the spring or summer. There’s therefore still time for schemes to really think through the implications of the new requirements and implement a solution that doesn’t just deliver Simpler Benefit Statements, but better benefit statements.

There are a couple of potential pitfalls. One is assuming that shorter automatically equals simpler. It doesn’t! Squashing the required information onto a couple of text-heavy, jargon-filled pages just makes things harder for members.

And if all you’re planning to do is provide the bare minimum in terms of facts and figures, with no context or clarification, that won’t help either. For something to be simple to understand, adding an appropriate level of explanation is often necessary.

As schemes, providers and legislators, we all need to remember why we’re making these statements simpler. You see, the second pitfall is to view simplicity as an end in itself.

Of course we welcome simplicity – our day job at Sparks often involves making the complex simple. But simplicity is just a means to an end. The end is usefulness. Our focus as we help clients respond to the SBS regulations will be on delivering useful benefit statements. That is, statements that are of genuine value to members in their retirement planning, helping them to understand their position and take action where appropriate.

So we’ll use the statements to tell a simple three-part story: where you are, where you’re heading, and what you could change. We’ll encourage the use of simple language where possible. But because our focus is on usefulness, we’ll make sure that these simple two-page statements point beyond themselves to give additional help or extra information for members who want those things.

What does that look like in practice? Well, we’ve already produced compliant two-page statements for a number of clients, some of whom have augmented the basic statement with an accompanying guide, explaining what some of the terms and figures mean, or an online hub where members can read more about available investment funds or underlying assumptions.

Investment funds are a case in point, actually: the chances are you won’t have space on your two-page statement to give members a fund-by-fund breakdown of where their savings are held. But you’ve probably got an online portal where members can not only get up-to-the-minute information on fund allocation and performance, but also request investment switches if appropriate. Think through the member journey and provide appropriate signposting on the statement so that it isn’t just simple, but useful in enabling members to log on and take action.

And while lots of schemes won’t be in scope for Simpler Benefit Statements in 2023, we think everyone’s in scope for better benefit statements. Our starting point for the conversation about your 2023 benefit statements is that this isn’t just an obligation to comply with. It’s an opportunity to improve. We’d love to talk some more about what that might look like for you.

Jenny is a Lead Consultant in the Sparks team and our lead on implementing Simpler Benefit Statements for new and existing clients.