Pension Pillar - Waking up the pension sleepwalkers

Once you factor out the point that we’re all going to get older, there aren’t that many absolute certainties in life. ‘Birth, school, work, death’, as alternative rockers The Godfathers put it all the way back in the late 1980s. However, one thing we’d all like to assume will be the certainty that – unless a footballer or short-lived pop sensation – we’ll be earning more towards the end of our career than we did at the beginning. All that grafting through our twenties, thirties and forties; all those early mornings and later evenings, all that experience we were picking up and applying liberally to our CVs so we could move up the ladder and earn more – should hopefully enable us to have ‘fun’ in our retirement should we wish too.

 By Martin Palmer, Friends Life

 However, whilst people are – I’d hope – earning more towards the end of their careers than at the beginning, it seems they are not thinking about putting more of it away for their retirement. In research we recently conducted we found that almost two thirds of 50 year olds (62%) still in employment have never increased the amount they pay into their pensions and I doubt, even considered consolidating their pension pots as they have moved jobs. This to me is worrying, and with only a quarter (25%) of those that have reached their 50’s and approaching retirement feeling they have saved enough to be comfortable. This leaves 75 per cent now regretting that they didn’t increase their pension pot payment throughout their working life - a lesson that we should all heed from this ‘approaching-retirement’ generation.

 Times are tight; we’ve all heard it a hundred times before, especially in recent years. But the thought needs to be seeded that times will be even tighter at retirement if we haven’t saved enough money throughout our working lives – no matter how hard we have worked. Auto-enrolment should hopefully help make this possible, by enabling more workers to start saving for retirement earlier and also by making peoples’ own pension plans more front of mind. But personal, and dare I say it, a grown up responsibility is still needed to ensure that throughout our working careers we each keep our pension and saving contributions in line with our salary rises. Keeping track of how our pensions are building-up throughout our working careers will also help us all understand our overall pension position. There are plenty of tools and forecasters which can help with making informed changes to contributions, which in turn will help increase the final pot size to better meet retirement needs.

 Also, at 50, when we seriously start thinking about the idea of retirement, we should not forget that there are potentially still 15 – 20 working years left to increase our ‘pot’ of money for retirement. Increasing contributions at this stage can make a real difference to the ultimate size of a pension pot an employee has, so even though it may feel like retirement is fast becoming a reality and that time is running out, there is in fact still plenty of time to save and to make a difference.

 What’s important is that people in this age group receive tailored and targeted communications relevant to their savings stage and age which will encourage and support them in making decisions that will have a real impact on their ‘pot’ size. Assessing what financial position you want to be in at retirement, how far towards that you’ve already got and what you need to in the last working years to make that goal a reality is a worthwhile exercise and as an industry we need to support and encourage that, waking people up to the fact it’s not too late.

 Additionally, at this stage of life, many people will be earning the most they have in their careers, making the prospect of increasing contribution size more manageable. Although now in touching distance of the point where they can stop saving and start spending, we need to encourage employees to do the less exciting saving part now so that they don’t also regret not doing more earlier like those in our survey. Then they can enjoy the ‘spending’ part in retirement knowing it has been well earned.

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