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Pension Awareness Day: your future self will thank you

Cherry Reynard
Written By:
Cherry Reynard

Today is Pension Awareness Day. This annual initiative is designed to help investors understand how much they will need to reach their savings goals.

Started by Pensions Geeks and Scottish Widows, and supported by a range of industry players, including Nest and JLT, experts have been on a ‘pension awareness tour’ from Edinburgh to London, with a battle bus providing free pensions advice. There is also a pension awareness TV channel to accompany the day.

Chris Knight, managing director, Legal & General Retail Retirement, said the initiative is welcome:“Auto-enrolment has kickstarted the process of reengaging consumers about planning for retirement – but we have won a battle not the war.  Far too many of us are not saving anywhere near enough for our retirement.  The belief that the State will provide, or the ostrich approach to saving for retirement are still much too prevalent – especially as we’re all living much longer.

“We need to jumpstart pension saving among young adults – using auto enrolment as the trigger to get people proactively engaged in their pensions. Pensions Awareness Day is a good opportunity for the industry, providers and advisers to engage customers on the importance of retirement planning and to get them into the mindset about saving for later life, including for long term care costs. It might be too much to ask that we can ever make pensions ‘sexy’ in the eyes of the customer – but if we can even make retirement planning engaging and accessible for today’s customer, we will start to see some serious progress.”

Matthew Phillips, managing director at Thomas Miller Investment, said people are often too negative about pensions. He said: “The advent of pensions is something that should be celebrated and cherished throughout the UK in the same way as the NHS. It allowed ordinary working people to have some security in later life and meant that they could actually retire.

“Tax breaks are one of the major benefits of pensions. There are no other investments that, if you are a taxpayer, I would use the word ‘guaranteed’ about. Pensions are the exception to this, within your allowances, you put money in and you will receive a tax break from the government. The more tax you pay, the more you get from the government. Every pound you put into a pension, the government gives you money back. In addition, the money grows largely without tax. Name me another investment that does that?

“On top of this, employers will often match your contribution. If you have a pension scheme at work, and by law your employer has to have one, check out the contribution levels. We see many people not putting into the company pension scheme, therefore missing out on money that they are entitled to as part of their remuneration.”

He pointed out that pensions are now more flexible – it is possible for your spouse and children to inherit a pension pot, for example. He added: “Many people say that they can’t afford to save into their pension. We understand that, but we say just start with a very small amount. Get into the habit, if you can, of putting away an amount, no matter how small. Think that you are paying your future self.”

Tom McPhail, head of policy at Hargreaves Lansdown said there is evidence people are becoming more interested in pensions: “There is an inherent conflict in UK pension policy at present: we’ve been using Auto-enrolment to bring millions of people into pensions by default. However having done that, it is now essential to help investors engage with their retirement savings and to make good decisions about how to make the most of the money they’re putting aside for retirement.

“The more engaged people are and the more they understand pensions, the more likely they are to trust them and to make good long-term retirement decisions. The good news is, if Google searches are anything to go by, people are getting progressively more interested in their pensions.”