Even MPs at Westminster not renowned for their grasp of financial services
(sadly, still the majority) have come to appreciate that one of the biggest
issues confronting the Government is how to succeed in getting the message
across to every man and woman in the country that they need to save for
their retirement. Future Governments, no matter their political hue, face
the same potential nightmare of insufficient funds to provide pensions for
a bigger and longer living elderly population.
The FSA is well aware of its responsibilities in this area as two of its
key duties involve promoting public understanding and protecting the
consumer. Another of its objectives is to maintain confidence in the
financial system. Not an easily achievable harmony, with public fears
having escalated in the face of pension misselling, lack of tranparency in
life policies and now accusations of high charging by some investment funds.
The main problem is that any investment information is likely to look
daunting, even to the initiated. No matter the simplicity of the language
used, the volume of detail that needs to be included in product literature
adds to the deemed complexity and is considered off-putting.
When something in the region of half of all adults have little if any
savings, radical action is called for.
Saving seems to have little to do with income level as many pensioners on
very modest incomes still manage to put aside some money. Similarly, there
are those who choose not to or who happen not to save who are nevertheless
high earners and from distinctly advantaged socio-economic groups.
Of course, there are obstacles to saving and investment, lack of funds
being the most obvious. However, there are many people for whom saving is
simply below other items on their current list of priorities. All too many
still believe that it need have only a low or no place on their agenda.
Last week, a report from the actuarial profession urged businesses to give
employees access to financial advice to help them prepare for retirement.
Of course, this would mean that businesses, too, would have to be prepared
to ensure that the potential for bad advice was minimised but, equally, it
could be a valuable additional employee benefit that could help to reduce
staff turnover and the associated costs.
But I would go further than the call made by the actuaries. Something I
would add to the wish list for employees would be for employers to supply
to their staff six-monthly statements and reports on their company pension
While I admit this would have spurious relevance to those still fortunate
enough to be in defined-benefit schemes, for those in the growing group of
people in defined-contribution schemes there would be real added value.
Not only would this promote a greater awareness of what goes on within
their pension fund in general but their pension account would take on
greater significance in their overall personal financial planning.
There is a good point about learning in the workplace. The better the
value and the costs of the company pension and its potential benefits are
explained, the more likely people are to become aware of the need to make
Perhaps peer group pressure from those better versed in what psychologists
call the merits of deferred gratification will have some positive effects
before whichever Government in the future has to bite the bullet of making
pension saving compulsory.
Anne McMeehan is director of communications at Autif