“Spending on retirement” or “saving for old age”?

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If we invest in our business, we call it capital spending. If we invest in our retirement, we call it “saving for old age”.

I regard capital expenditure as a positive investment in our capacity to pay salaries and dividends in years to come.

I regard “saving” as cost-containment; while necessary it is a means of reducing liabilities not a growth strategy.

All too often we confuse investment and saving money, the two are not the same thing!

The distinction was explicitly made by Victoria Derbyshire when she ran the morning show on Radio 5 live. Nicki Campbell asked her is she saved into a pension

She did that girlie laugh and turned on Nicki

I can’t save – I love spending!

But then she explained…..

Every bit of money that she put in her pension plan was money spent on her retirement.

Most people will find this empathically right. Saving is an act of denial, an act that prevents rather than enable.

Going into a shop and spending money is an affirmative act that relieves the desire (as well as the wallet). That’s why we talk of retail therapy.

Those who argue that we should save more are demanding denial. It’s the kind of puritanical behaviour that gets right up our collective noses. Telling us to buy an annuity is hardly any better. I will choose how i spend my spendings think you very much!

Re-reading the Treasury Command Paper; “Freedom and Choice in Pensions”, I am struck by the emotional intelligence of the document. The Treasury get it.

This is why the really good communicators can convince us, it is not just because they use worlds that are emotively loaded (spend and save) (bargain and rip-off), it is because they insert these words into stories.

Alvin Hall, who I heard speak live last week, talks about the “narrative” that he uses to engage with his listeners. In his half hour talk, there were a number of memorable stories , all of which remind me of the point he was trying to make.

It is these subtle nuances of story-telling, this use of emotive language to sign-post you in the right direction which is the skill of the polemicist.

When we ignore these skills and forget what power is invested in words and stories, we lose the argument.

No amount of statistics , nor charts , nor equations can outfox a foxy storyteller.

Victoria Derbyshire explained the save and spend point by telling a story about her Dad, who reminded her how much better she was at spending than saving.

“Just remember to spend on the future”

he told her- that’s what she does!

The way we talk with our clients is really important and it doesn’t matter whether the client earns £10k or £10m, making simple distinctions between investment and cost saving matters.

I believe practitioners have a duty to encourage clients to think about getting the balance between capital expenditure and cost saving. I also think that encouraging them to think about how much money they can spend on their retirements is a part of business planning.

Thinking about pension planning as part of the business planning process may be counter intuitive to most of us, but if we adopt the clear-headed thinking of Victoria Derbyshire- it makes sense.

This post first appeared in http://www.pensionplaypen.com/top-thinking

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly and the Pension Plowman
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