Following three key announcements affecting pensions this week, Andy Zanelli, head of retirement planning, AXA Wealth, asks whether we are finally waking up to the pensions nightmare and realising that there is work to be done.
“This week has seen research from the ABI that found that one in five employees believe that they will never retire, Steve Webb announced that the annual cap on contributions into NEST could be lifted by 2017 and Danny Alexander confirmed that the state pension age may have to rise faster and further than previously thought. All of which make it even clearer that funding for retirement needs to be treated as an ongoing process from an early age if we want to avoid a situation where people are forced to work longer as they can’t afford to retire. Recent research from AXA Wealth, which shows that the average shortfall in pension provision for UK adults is more than £4,600 per year, demonstrates the scale of the challenge ahead. The government, financial services industry and providers need to work to ensure that pensions savings is not only something people can identify with, but also something that they view as essential.
“If the figures from the ABI were designed to shock people into appreciating the need to save for retirement, Steve Webb’s announcement should be approached with a balanced view. Lifting the cap is appealing from the perspective of cost and simplicity, but while this is a step in the right direction it might not be enough. There is also a danger that many consumers may see this as the solution to the retirement problem which is, in fact, much more substantial. Given the number of reports looking at cross generational financial struggles, not least the squeeze on families, it is understandable that people are more focused on today’s costs and concerns, let alone next month’s or next year’s. Retirement is often seen as a far off and abstract concept, but consumers need to better understand the consequences of postponing pension contributions or delaying planning.
“The next few years will be crucial if we are going to succeed in overcoming feelings of inertia toward long-term saving, but initiatives like auto-enrolment do provide some hope for an improved outlook. A small step on the journey, but there’s a long way to go.”
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