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26 March, 2018   |   By Fiona Tait   |   Blog

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Say it loud, say it clear @Pensionsgirlie blog 26.3.18

Observing my offspring and his friends has led me to once again ponder the fundamental question of how on earth the human race has survived this long. Sabre tooth.PNG (1)Surely in the Stone Age if the almost-a-teenager made too much noise, or whinged irritatingly he would have been eaten by something large and predatory, thus solving the problem??? And if he’d lost his favourite sling-shot he’d either have to look for it himself or make a new one. Laundry would be irrelevant and if he wanted to go to a cave party he’d have had to actually use his legs instead of whinging for a lift. Oh for the simple life.

Unfortunately the FCA’s latest data bulletin suggests that the UK’s DC pension regime is equally unfit for real life. People who are either

  1. Not in financial services (I believe there are some although clearly not in my social circle), or

  2. Do not have a final salary scheme (I know there are lots of these, including an increasing proportion of those in group 1)

DO NOT YET UNDERSTAND THAT THEY WILL HAVE TO BUILD THEIR OWN PENSION PLAN. No one is going to do it for them and if they leave it too late they will have very little to live on when they are no longer fit to work.

The statistics are frightening:

  • 81% of people have not though about how much they should be saving for retirement

  • 32% of people with DC pensions said they did not know the size of their pension pot

  • Only 52% of people with DC pensions received an annual statement and actually read it

  • 55% of all pension pots accessed since pensions freedoms were taken as full withdrawals

  • Only 68% of those entering drawdown took regulated financial advice, and only 32% of those withdrawing the full pot and 34% of those buying an annuity

Coincidentally I was at a PPI seminar describing the Australian pension market this week. They have a relatively mature DC system which people buy into because it belongs to them. Granted contributions are compulsory, unlike here, but the “Super” is popular because people know it’s theirs and they can manage it however they want. Most opt for default funds, but there is a growing proportion of self-managed funds as well. Most importantly employer contributions levels are now at 9.5%, having built from 3% in 1987, and are set to go up to 12% by 2025. It’s taken 30 years but the nettle is being grasped.

Megaphone.PNGMeanwhile in Blighty I suggest we shout, and shout a lot:

DC PENSIONS ARE UP TO YOU. LOOK AFTER YOUR PENSION.

One last statistic:

  • 47% of the people who accessed their defined contribution pension over two years ago say it is not enough to live on

Action is needed, and needed before this becomes acceptable.

 

Source: FCA Data Bulletin: Issue 12 – March 2018