It’s pension awareness week.. perhaps it needs to be a decade!
It’s pension awareness week but is a week enough to engage and get people to understand the importance of saving for their retirement. Overall I wonder how many of the people who both need to save more and can afford to save more will be aware of pension awareness week.
Perhaps we need pension awareness year or possibly even decade!
What people should be under no illusions of is the following:
- We are all living longer. Life expectancy increased from 50 to 75 in the 20th century and shows no sign of slowing down in the 21st century.
- The state pension is not enough to live on. And many people won't qualify for the full state pension.
- Saving for retirement costs money and the earlier you start, the better chance you will have of achieving your retirement objectives.
Most people would probably understand the issues above but still the majority fail to take the necessary action to fund for retirement. So what can be done?
Auto-Enrolment is undoubtedly a positive step to get more people saving and with low opt-out rates, the AE initiative is generally viewed as a success. But why let people opt-out at all?
And more fundamentally, contributions, employer and employee, need to increase significantly, well beyond the planned increases, if the savings levels are going to provide a reasonable standard of living in retirement. In Australia they are further down the path of AE and have recently increased the minimum employer contribution to an impressive 10% - clearly in the UK, we have some way to go.
Compulsory and realistic pension contributions may not be a vote winner but for me, it’s the only sure fire way to tackle the retirement/savings gap that exists.
The alternative is pensioner poverty or working throughout retirement, but who can predict whether they will be mentally or physically able to do so?
Finding a solution to the savings gap is not easy and we need the wider population, young and old, to understand the issues and why it is so important to take action. While the Pension awareness week is an excellent initiative, to get the level of education and understanding that is needed will require a much greater and sustained effort!