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Experts clash over the benefits of pensions education

UK Currency Pound 480

Pension experts have clashed over the need for improved financial education as providers focusing on automatic enrolment turn their attention to the design of default investment funds.

Speaking at the launch of the ‘Nest Insight’ report last week, Lane, Clark and Peacock principal Andrew Cheseldine suggested people who stay in a default fund tend to achieve better outcomes than those who make investment choices.

He said: “There is quite a lot of evidence that suggests people who are automatically enrolled and go into defaults get better results in retirement than people who make a choice.

“The main reason people who make their own investment choices do not do as well is they either go into a fund and stay in it for 40 years, which leaves them exposed to certain risks, or they trade regularly and they forget about the frictional results of transactions.”

However Hargreaves Lansdown head of pensions research Tom McPhail said: “While defaults are part of the solution to auto-enrolment, they also sow the seeds of the next problem because it enables people to default all the way through to an inadequate retirement. You get default membership, default contributions, default investment choices and default retirement age, and for most people that will not result in a good outcome.

“We need to build a resilient system. I do not think you can do that by lulling people into a false sense of security that the default will be good enough.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. What exactly is pensions education?

    How about instilling a sense of fiscal rectitude in children and young people? Rather than ramming a subject that the general public (aided and abetted by the media and inadvertently by successive governments) have be trained to mistrust i.e the pensions and retirment planning in general?

  2. HL are talking nonsense and talking up their offerring.

    If there was evidence that people were better off switching regularly then HL would have produced this.

    They haven’t therefore we can summise that clients lose money on average by switching

  3. Caroline Stephens 1st February 2013 at 10:32 am

    You might be interested to know that the school classroom is a good starting point in which to take pensions. I gave a workshop to sixth formers at a local secondary school last year and incorporated pensions/savings into a student’s budgeting plan. It was accepted by the students. We must address the need for a greater savings culture and the school environment is a good place to start.

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