Well – I can confirm that Gen Z is being mis-sold a pension at the end of their rainbow.
Over a third of young people believe the pensions industry and the wider financial services sector do not adequately communicate the benefits of saving into a pension, research from People’s Pension shows.
The benefits of saving into a pension is a pension. A pension is an amount paid into your bank account month after month, year after year. It stays constant and doesn’t fall away when inflation challenges. It doesn’t stop at 80 or 90 , it stops when you stop and if you have a spouse, it stops if he or she lives beyond you.
A pension can be in part swapped for tax-free cash when you retire but it is not a pot of money as you are sold it is at present.
Young people have figured out that they are not being told the truth. Here is what People’s Partnership discovered
Over a third of young people believe the pensions industry and the wider financial services sector do not adequately communicate the benefits of saving into a pension, research from People’s Pension shows.
The firm’s survey of 2,000 UK adults weighted to be nationally representative – conducted by Opinium last August and September on behalf of the defined contribution master trust provided by People’s Partnership – found 36% believed the industry failed to communicate the benefits of saving into a pension.
Of these respondents, more than a quarter (27%) said firms placed too much focus on selling products over providing education, while one fifth said they made pensions feel “boring” and “irrelevant” and a slightly lower proportion (16%) said providers used complicated language and jargon.
There is of course another way of showing people how they are doing with their pension.
People’s Pension proposition director Kirsty Ross said: “In a world where financial doom dominates pension conversations, young savers are tuning out. Our research shows they are not disengaged because they don’t care, they are disengaged because the messages aren’t working. Scare tactics and jargon are alienating the very people we need to reach.
“What cuts through is honesty, simplicity and practical advice that shows how small steps today can have a huge impact tomorrow.
I agree; the Government offers you a statement of the pension you have built up with them. Here are a few of mine over the past few years.
My pension has increased over the past few years. When I started looking, I could get £145.35 pw and now… well look
This is the model that my Pensions Mutual will be working to. The pension scheme I want to run will be telling people precisely the same thing as the state – people’s entitlement to an income from a certain date to the day the pensioner dies.
There will be more if people want it, there will be an estimate of how much pension can be swapped for tax-free-cash. There will be an estimate of the pension a surviving spouse will get and everything will have the same warning as the state pension gives – nothing is guaranteed.
Of course the amount of pension will be dependent on all kind of things that aren’t known today. No one can tell the amount exactly. It depends on the amount of inflation, on the returns from the markets on the pension fund and whether we continue to live longer.
You will have chances to take your pension early, late or on the day we call your retirement date. But what we’ve learned is that people trust the state pension and if it works for everyone, it really should work for those saving into a private collective pension scheme known to experts as CDC.
As I mentioned elsewhere, in the states, most workers do not have retirement preparation as a top financial priority.
My 46 years of experience have confirmed for me that the better option for prompting rank and file/regular workers to save requires that they have “liquidity without leakage along the way to and throughout retirement” because most are unwilling or financially unable to earmark savings today for a monthly pension amount commencing at/after age 67 – 40, 30, or 20 years in the future – as they are living paycheck to paycheck today.
I found DC designs that did both, provide liquidity today and, avoided leakage so that savings continued to accrue for tomorrow, provided the greatest value to participants – justifying the employer spend.
So, thirty years ago this year, I actually removed the word “retirement” from my employer’s DC plan, replaced it with a theme titled: “drive to your dreams” (whatever you may be dreaming about).
And, my pitch to new hires, on their first day on the job, changed to “Will you be a 401k middle-class millionaire … someday?”
For someone age 21, we showed how that was possible. For those we hired at age 55, we showed whether that would occur depending on their accumulated savings to date.
Try as I might, I was never able to “sell” workers on the value of our defined benefit pension plan (with its final average pay formula, benefit commencement at age 55 or older). My chief legal officer suggested that I poll retirees on their satisfaction, but there was no need for that, and, while it may have justified the cost for some who worked there for 20, 25, 30 or more years, most workers prior to 1989 never vested in the pension, and those who vested and separated after 1988, received only a modest benefit from the plan.