View more on these topics

John Cowan: Why we need to make saving compulsory


In the face of unprecedented change, the pensions and savings industry has fared well. Auto-enrolment is performing the job it was supposed to do with only 10 per cent of eligible workers opting out of a scheme so far. The pension freedoms have opened up options for those looking to maximise their retirement income and the maturing master trust industry is helping to improve engagement and transparency levels among members.

Yet, despite these successes, there is still an elephant in the room. People just are not saving enough. Research by Deloitte found that by 2050 the pensions deficit could rise to £350bn – the equivalent of approximately £8,000 per person per year, while the Money Advice Service estimates that four in ten adults in the UK have less than £500 in saving. With the futures of millions of Brits (and their families) at stake, action desperately needs to be taken to reverse this.

The measures the Government has introduced are admirable and genuinely a step in the right direction in getting people to save harder. Behavioural economists and policy experts have applied the nudge technique to auto-enrolment, in an apparent admission of the basic inertia of the populace when it comes to talking about pensions. While this has helped reduce the deficit, it has also had the unfortunate by-product of lulling people into a false sense of security.

Sadly, putting just 2 per cent of your salary into a scheme – even with employers’ contributions – is not enough to guarantee a comfortable retirement. Now:Pensions suggested recently that up to a quarter may opt out of auto-enrolment once the contribution figure hits 8 per cent, which hardly makes comfortable reading. If this happens, the very future of auto-enrolment could be in the balance.

This highlights a worrying cultural truth. British people are no longer interested in saving. There is a culture of gratification – the availability of cheap debt has made it easier for people to borrow cheaply, while perversely, low interest rates have discouraged people from saving. With people less willing to put off large purchases, the days of the man from the Pru have gone.

Unfortunately, you cannot change habits which are as ingrained as this overnight – attitudes take time to recalibrate. But where pensions are concerned, we do not have the luxury of time.

The industry has worked hard to engage with “ordinary” consumers and to improve understanding of and interest in pensions and the tax incentives and advantages that come with them. However, despite their prominence in the media, pensions still do not feature anywhere near the top of many people’s financial priorities. The strategy has not worked.

A radical approach is needed. We need to make saving compulsory.

This may be controversial and will be difficult for those whose incomes are already stretched by the everyday costs of living. But this would actually be a kindness – and help to cushion the financial blow in retirement for many people. When we are obligated to pay for something, we tend to find the money to do so, even if it means going without something today. We need to inject the same urgency into our saving habits as we do into paying our mortgages, bills and taxes.

The softly softly approach is not going to work when it comes to closing the savings gap. There will be a segment of the population on lower incomes, who may not have the means of doing this, but if we can start mandating it for those on median incomes, it would be a real step in the right direction.

We need to rip up the rulebook and make saving compulsory.

John Cowan is executive chairman at Sesame Bankhall Group



Hard numbers and harsh truths in property vs pensions debate

The provocative comments from Bank of England chief economist Andy Haldane that property trumps pensions when it comes to retirement planning have reignited an age-old debate. The comments come off the back of worrying research from Citizens Advice that suggests large numbers of consumers are eschewing pensions in favour of bank accounts, and after Money Marketing […]


Lifting the veil on the benefits of pensions

Andy Haldane is fast becoming another Martin Wheatley. What I mean is, someone in a position of power who, to paraphrase the former FCA chief exec, speaks first and thinks later. For those who missed the furore, the Bank of England chief economist has exercised advisers and the wider pensions industry for saying property is […]


Mike Morrison: When is the deadline day for FAMR?

Last week I was invited to sit on the panel for a debate about the Financial Advice Market Review. The panel was an interesting group of eminent industry people – and me (I quipped on Twitter before that I was the only one that I had not heard of.) In the run-up to the event […]


News and expert analysis straight to your inbox

Sign up


There are 5 comments at the moment, we would love to hear your opinion too.

  1. Pardon?
    “Now:Pensions suggested recently that up to a quarter may opt out of auto-enrolment once the contribution figure hits 8 per cent”
    This is just another survey and should be treated accordingly.

    “A radical approach is needed. We need to make saving compulsory.
    This may be controversial and will be difficult for those whose incomes are already stretched by the everyday costs of living. But this would actually be a kindness ”

    Good grief, talk about nannying. I think you will find Joe Public will be quite happy not to have this type of “kindness” imposed on them, but perhaps we should have a universal Government approved budget for each person on the lines of.
    5% of income on clothes
    10% on food
    7% on heating your house etc etc.
    Does that sound like an acceptable idea?

  2. Hmm, we could do this through extra NI contributions and call it something snazzy like SERPS or THE STATE 2nd PENSION… oh yes, silly me! we’ve already tried this, abolished it when the non-cautious folks have all had theirs out and then stolen it from the cautious folk’s via a new flat rate state pension. Awesome!!!!

  3. Probably the most patronising article I have seen. In real life, many working families don’t earn enough from month to month for any pleasantries – they just eat and pay their bills, with nothing left over.

  4. Great idea – but until we build a LOT more houses and burst this bloody silly housing bubble, then young folk just wont have the disposable income to save.

  5. I’m sure the massively over inflation and then some increases to the cost of living and houses has nothing to do with the public’s “disinterest” in saving.

    Yes, it’s clearly the publics fault for not being “interested”.

    I wonder how much you can afford to save, I’m sure your job title carries an equally snazzy salary? Who are you to tell people they need to save more when you don’t have to make the decision between whether you buy fuel to get to work or food for that week?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm