Most people think that pensions are worth having but are boring things that are best dealt with by dull eggheads and ignored until they are needed.
Slow burning and steady is the impression, so risk is not a word that springs to mind when most people think of what they want for their retirement savings.
Yet, for anyone with several decades to go until retirement, saying you are comfortable with a high level of risk does not mean you are being cavalier with your pension.
In fact, it means the opposite. It means you understand the relative strengths of equities and fixed-interest investments and you do not want to risk missing out on the best option by leaving your cash in the slow lane for decades.
The Government’s attitude to risk is that it would rather people did not take it. The financial advisory community’s response should be to take the opposite view. Too often, however, the concerns of employers and trustees override the needs of the person the pension is actually there to serve.
I am not advocating uninformed bets on the Kabul stock exchange but am talking about encouraging far more than 60 per cent equity investment for anyone under 40.
The consensus belief is that equities will outperform fixed-interest instruments over the long term so, if you subscribe to that view, why not put 100 per cent of your money behind that belief at the very beginning?
If you put 60 of your 100 pension investment into equities because you believe they will outperform, why would you back an asset class you expect to do substantially worse with the remaining 40?
One of the problems is the concerns of third parties. IFAs will not want their clients to panic sell and pull out their pensions if and when they pass through a bear market.
Employers and trustees will take a similar attitude to employees when their company statement shows their fund value dropping through the floor.
Both these points are perfectly valid. Taking risk that clients are not comfortable with is not a good idea and will undermine pension and other saving in the long term.
So the answer should be a concerted effort by the industry to increase the wider public’s tolerance of risk. Without the belief that markets will bounce back in the very long term, risk is, of course, dangerous. This is a massive task but, in my view, it is a challenge worth making a start at.
The Personal Finance Education Group is taking some steps in the education of the next generation with its Learning Money Matters initiative that is meant to reach 1.8 million schoolchildren.
I do not know whether the relationship of risk and reward forms part of the project’s remit but perhaps it should. These children will be as attracted to the money-for-nothing nature of equity investment as adults are.
As an occasional reader of the Whizzer & Chips comic in the 1970s, I was always impressed by a character called Tiny Tycoon, a school kid who could figure out ways of making serious loads of cash by being smarter than the other kids.
Educating children in the long-term benefits of equities is only part of the picture.
Today’s workers also need to be able to understand risk and include it in their pension funds if they want a healthy retirement, as underlined earlier this month with the publication of the annual Barclays’ annual equity gilt study.
It shows equities have generated returns on average 5.3 per cent above the prevailing inflation rate for more than 100 years compared with a paltry 1.1 per cent for gilts and 1 per cent for cash.
If we are to breed a nation of tiny tycoons who are to become wealthy pensioners, then perhaps Barclays’ equity versus gilt graph should make it on to the national curriculum.
John Greenwood is editor of Corporate Adviser