We all agree that something must be done about the woeful lack of get up and go when it comes to the UK workforce saving for retirement. The
evidence is piling up.
A Friends Provident survey 1 to highlight the problem in ElderCare Week found that 31% of adults are relying on receiving an inheritance to help fund their retirement, 22% are ‘just hoping’ they will have enough and 21% don’t have any idea how they will support themselves if they reach retirement age without enough money. An unfortunate 38% are planning to fund, or are funding their retirement, through the meagre state
pension. More than half (55%) of UK adults either think they are not saving enough or are facing the reality they have not saved enough towards their retirement.
This is a very powerful argument for autoenrolment of employees into pension schemes but it won’t completely solve the problem of inertia; employees will still be able to opt out or sit back and let someone else make contribution and investment decisions. Default funds will become distended with contributions when universal auto-enrolment is introduced in 2012. We will still have the problem of
convincing people that they do have to take control of their financial futures. A complete change in attitude is needed.
Not unexpectedly most of the adults in our survey (75%) of UK adults were of the opinion that the Government is not educating people appropriately on the importance of saving for retirement. Maybe the ‘importance of saving’ message is not the one that needs to make an impact. Yet another ‘do this’ instruction is not what many of us want to see plastered across hoardings, newspapers and TV. Autoenrolment and the introduction of the Personal Accounts scheme will come with an ‘importance’ message any way. What we want to see, in the slip stream, is the message and the means for workers to take more control of managing finances, including savings.
Savings and pensions have to enter, even turbo charge, the online money management capability of the majority of UK adults. If that sounds too aspirational, consider the shift over the past decade in online banking, money transfer, tax returns and paperless car tax renewal using electronic insurance and MOT records. Pension schemes have come a long way in providing online statements and tools for illustrating individual risk appetite and potential income based on contribution levels, but the big employee switch on to online pension management is still to come. And some of us are saying: why restrict it to pensions?
Employers are reviewing their pensions provision, and employees’ benefits in general, and asking whether they meet the needs of their workforce. It would be more appropriate to say ‘workforces’ since even small companies will often have a very diverse range of employees capable of being very broadly, or very narrowly, segmented in terms of appetite for wealth management and tax efficient saving.
Managing this complexity and providing more flexibility in the types of benefits available to employees will become much easier with the introduction of corporate platforms. Essentially these, and investment platforms will transform investment management for pensions, share save schemes and corporate ISAs but the corporate platform will also transform the delivery of the savings and pensions message. Online education and planning tools will be available at the click of a mouse. Interactive money management sounds a lot more interesting than ‘planning for retirement’.
1 The research was conducted by 72 Point in April 2009 and surveyed 2,462 adults across the UK
or follow Martin on Twitter: www.twitter.com/PensionsWomble