On a recent evening in Bristol, out celebrating with our latest recruit, I struck up a conversation with two young chaps who worked in advertising and media. They were both approaching their 30’s, had good jobs and were on the first rung of the property ladder. One of them had also just celebrated his child’s first birthday. They were thinking of setting up their own business, and over the course of a few ciders, we agreed it would be a great success. One of the things they told me they had already “ticked off their list” was pensions; they were auto-enrolled into a scheme last year and now paying the default, minimum contribution.
We talked through what that would actually mean for them in 40 or so years when they came to retire, and it was a revelation to them having considered their retirement planning as: “job done”. What was even more of a revelation was the fact that they were leaving free money on the table every month. They had disposable income they were struggling to get to earn a return for them, and yet no one had ever explained for every additional £100 they paid into their pension, the government would effective add to by way of tax relief and their employer would add more!
They went away to consider how to better provide for their retirement. However, it did leave me slightly exasperated. How many other people there are out there thinking their retirement future is looking rosy following AE? I can’t sit down and have a pint with all of them! So just how do we get that message across?
AE has been a great success. More people than ever are now saving for retirement. However, it is also dangerous. It gives many a false sense of security. In a perfect world there is little doubt that help for employees as to how to provide for their retirement should come from Employers and Trustees. They are the people who are most trusted and who have the knowledge to provide the help.
So what is stopping them?
Most will claim that Regulation prohibits them from helping. Frankly this is just plain wrong. There is plenty that Employers and Trustees can do to help their employees and members avoid a life of poverty in retirement without falling foul of the law. It is time for everyone to stop hiding behind legislation and to do the right thing. If we don’t then we will see a crisis of pensioner poverty that will haunt us for a generation.