London, 03 March 2020: New research today from PensionBee finds that 23,500 trees are destroyed each year by paper annual benefit statements, at a time when consumers and policymakers are calling for increased action on ESG.
The UK pensions industry still posts an estimated 200 million pieces of paper each year in the form of annual pension statements and envelopes. An annual statement is typically six pages long, and aims to inform consumers how their pension is performing.
UK savers collectively receive roughly 40 million annual statements(1). This is equivalent to approximately 23,500 trees worth of paper(2).
Paper intensive statements continue to be used by the pensions industry despite Government commitment to planting millions of new trees to achieve UK net zero carbon emissions by 2050(3).
Pension trustees are now being asked to focus on new legislation around ESG, whilst other parts of their businesses simultaneously damage the environment by posting out millions of pieces of paper each year. PensionBee estimates that the paper, printing and postage costs involved in sending statements costs the industry over £21.5 million annually(4).
Very few pension providers offer digital statements as standard and the industry has previously described the process of sending email statements as ‘burdensome’(5).
With banks and utility companies already axing paper statements, the pensions industry is lagging behind in adopting digital statements. PensionBee found that consumers deem pension paperwork to be not only confusing and hard to engage with, but also a hassle to store for a lifetime(6).
The issue has not gone unnoticed by the government, who in 2019 launched a consultation on ‘Simpler Annual Benefit Statements’. Debate has focused on simplification and standardisation but PensionBee research shows that the more pressing issue is in fact paper.
As Pensions Minister Guy Opperman seeks legislation to require trustees to incorporate ESG into their investment principles, this research shows that it’s clearly time for all annual statements go digital as well.
Clare Reilly, Head of Corporate Development comments: “The futility of paper statements is clear. They destroy the environment, cost the industry millions to send, prevent meaningful consumer engagement and mostly sit unopened for decades in drawers. Digital statements are better for the planet and better for savers. Pensions need to go digital-by-default or face becoming irrelevant in the age of Open Finance.”
Table 1 Sources of data - number of trees
|a) A4 sheets produced by 1 Tree||8,333||Dartmouth University - ‘Forest and Paper Industry’|
|b) Average number of pages per annual statement||6||Average taken from PLSA and ABI SABS submissions|
|c) Average number of sheets per pack||4||6 double sided pages would require 3 pages. Plus cover letter with address usually comes on a separate page.|
|d) Number of sheets per C5 envelope||1||https://www.allcolourenvelopes.co.uk/pages/envelope-size-guide|
|e) Pension pots which post paper annual statements||39,176,949||See table 2|
|f) Number of trees required for annual statements per year||23,507.10||(gxc)+(gxd)= 195,884,745 195,884,745/a = 23,507.10|
Table 2 Sources of data - number of pots
|a) Total membership of occupational pension schemes UK||45,600,000||ONS|
|b) Total number of occupational memberships in private sector||29,900,000||ONS 2018 data, table 2|
|c) Total number of non-workplace pension accounts||12,700,000||FCA 1.4|
|d) Total number of private sector GPPs ((which are excluded from both data sets above)||5,241,949||ONS 30.4% + 7.5% = 37.9% of 13,831,000 entitlements|
|e) Total number of private sector pots eligible||47,841,949||b+c+d|
|f) Total number of pots that already receive a digital statement||8,665,000||NEST (7.9M) + PensionBee (40K) + SEI master trust (25K) + Smart (700K)|
|g) Total number of pots that have a paper statement associated with them||39,176,949||e-f|
Table 3 Sources of data - cost to industry
|a) Pension pots that have a paper statement associated with them||39,176,949||See table 2|
|b) Paper, print and mailing cost per statement at wholesale price||£0.55||Based on a quote from The Direct Mail Company:£459,417+VAT for printing and posting 1 million C5 sized letters each with 4 sheets of paper enclosed. Letters sent second class post. (£459,417x1.2) /100,0000= £0.55|
|c) Total cost of printing annual statements per year||£21,547,322||axb|
PensionBee customer views on digital statements
PensionBee customers have commented, ‘Nice to see all my mixed up pension paperwork gone, and see a current balance anytime on the app‘. Another echoes this attitude, ‘elimination of paperwork is very welcome!‘.
Customers indicate that accessing information online could lead to better saving habits, ‘You are more likely to invest more in your pension because it’s visible and understandable. An incomprehensible statement once a year was never very engaging - this is where the government and pension companies have been getting it so wrong. I can finally understand and plan my pension!’.