Pensions Awareness Day: A five-point plan to plug the savings gap

15th September 2015

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To mark Pensions Awareness Day, which falls today, Rob Gardner, co-CEO of Redington, the investment consultancy, has launched a five-point plan to boost the nation’s retirement savings…

As we shift from defined benefit to defined contribution, the burden of responsibility will increasingly rest on the shoulders of the individual. Financial education is now more important than ever.

Affordability of pensions is one of the UK’s biggest current challenges.

Our population is ageing, fertility rates are decreasing and the government is already heavily in debt.

Let’s ask the tough question. Who will pay for future provision? We need to make decisions now that have an impact in 10, 20 and 50 years and that reflect profoundly changing demographics and savings levels.”

Health and pension spending is unsustainable

According to a demographic research report by Amlan Roy at Credit Suisse, health and pension expenditures are projected to grow close to 20% of GDP. This is unsustainable. Life expectancy at 65 years has also exhibited a significant increase since 1990: from 16 years to over 20 years today.

The government now not only has to support a larger group of retirees (baby boomers entering retirement period) but it also has to support them for a longer retirement period.

This has very immediate as well as long-lasting consequences on health care, long term care and the pensions expenditures of governments. Compounding the problem is increasing life expectancy combined with low fertility rates which leads to an increasingly high old-age dependency ratio.

We all want a certain and comfortable retirement, but the majority of us do not want to adopt a discipline of saving. Why not? Are we unsure about what we want, or do we lack the culture and collective mindset to overcome our need for short-term gratification? This is a collective problem for individuals, companies and government – it should be in our mutual interest to solve it.

Only a few nations embrace the ‘save today to finance a better tomorrow’ culture. These include Norway & Singapore: nations that exemplify long-term financial planning & thinking.

With this in mind, I have set out a five-point plan for a healthier financial future, with the aim of fuelling further policy debate.

Five-point plan:

·         Implement a far-reaching financial education programme to build the financial capability of our children – tomorrow’s workforce.

·         Deliver a simplified tax system that is fair for all

·         Establish a 15% national savings target. Auto-enrolment is a step forward, but even the 2018 auto-enrolment figure is merely poverty prevention.

·         Install an independent pensions commission with the power to make real decisions, free from political interference, akin to the BoE.

·         Set out safe harbour guidelines encouraging companies to educate and inform their workforce on how to take responsibility for financing their financial freedom.

1 thought on “Pensions Awareness Day: A five-point plan to plug the savings gap”

  1. Jive Bunny says:

    “…health and pension expenditures are projected to grow close to 20% of GDP. This is unsustainable.” – Why? Is there a certain percentage which is sustainable? If so what is that percentage and how is it sustainable when 20% is not???

    “Life expectancy at 65 years has also exhibited a significant increase since 1990: from 16 years to over 20 years today.” AHEM!! Well, for females any way – http://www.ons.gov.uk/ons/rel/subnational-health4/life-expec-at-birth-age-65/2004-06-to-2008-10/statistical-bulletin.html

    “The government now not only has to support a larger group of retirees
    (baby boomers entering retirement period) but it also has to support
    them for a longer retirement period.” – That’s if the increasing obesity problem (excuse the pun) doesn’t kill them off earlier.

    “This has very immediate as well as long-lasting consequences on health
    care, long term care and the pensions expenditures of governments” AT LAST something I can agree on!! Only for different reasons as the major threat is increasing NHS expenditure on obesity related illnesses.

    “…the majority of us do not want to adopt a discipline of saving. Why not?
    Are we unsure about what we want, or do we lack the culture and
    collective mindset to overcome our need for short-term gratification?” – Or maybe it’s just because we don’t want to be ripped off by lazy, incompetent pension fund managers ??…

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