I have been talking about pensions to anyone who’ll listen for some time. The ‘You Only Live Once’ generation are particularly at risk here. Many of us are prioritising paying off debts related to university ahead of saving, while others are scrimping and saving for that all-important deposit for our first shoebox in zone 8; some of us are doing both. In turn, many twentysomethings are either out of work altogether, or are travelling on an endless merry-go-round of unpaid internships and low-paid contract work which doesn’t provide either access to a savings vehicle or the wages with which to contribute. Saving towards a retirement that is decades away can seem unimportant in today’s climate, even if we are earning enough to be able to do something about it.
There is a gender gap too. According to a survey from the insurer Standard Life, just 37 per cent of women save into a pension compared with 50 per cent of men. The statistics for both men and women are woeful, but we should expect to see an improvement as autoenrolment beds in. Women are more likely to take career breaks, when they may be earning little or nothing; it is vital, therefore, that women use the precious years of their early careers to save.
While there are valid arguments around improving trust in pensions, looking at costs and governance, there is only one solution to a larger income in retirement, which is to save seriously during your working life.
Labour must take this issue seriously. We need as a party to be aware of this, then start a debate about how to take this message to the country. Without saving adequately millions of people will find themselves forced, through economic necessity, to keep working long after they may have preferred to retire, long after their health allows them to keep going.
Traditionally, people may have downsized properties to boost retirement income, but that is going to be less of an option to a generation who cannot get onto the property ladder, or are still paying mortgages into their seventies. Our generation is having children later, and may live to see parents – who require our financial support – living longer. Wages can only stretch so far. Labour must craft an argument that supports people facing this challenge but states that the material choices people may have made in the past (second car, extra holiday, home extension) come at a cost to saving, and may be impossible while the economy is sluggish.
Pensions allow for an employer contribution and tax relief; contributions are taken from salaries before tax, so the hit on your wallets may not be as hard as you might think. We all need to look at our spending habits, and think about the kind of retirements we wish to have and how we will pay for them.
Helen Gibson writes in a personal capacity. She works for the Association of British Insurers.
Pensions fit for the 21st century? Reforming the saving habit and increasing contributions
6.30pm on 11 September, Westminster. For more details and to sign up, please see here
John Hutton Labour peer and former work and pensions secretary
Dame Anne Begg MP Chair, work and pensions select committee
Huw Evans Operations director, ABI
Jeff Prestridge Personal finance editor at the Mail on Sunday
As Britain gets older, long-term saving is more important than ever, but half of the working population is still not making adequate provision for their retirement. To make matters worse a -financial crisis, a predicted decade of austerity, low interest rates and depressed equity markets have meant that the task of encouraging people to save more and lock their money away has become even more difficult.
As individuals and governments pay down significant levels of debt, how will the huge uncertainty surrounding long-term welfare, a pensions industry still struggling with the legacy of past mis-selling scandals, and the collapse of many defined benefit schemes affect long-term saving? Indeed, ultimately, how do we encourage more people to save enough for a decent living standard in retirement?
Refreshments will be served.
The ABI speaks on behalf of over 300 UK insurers, representing over 90 per cent of the UK insurance market, and promotes best practice, transparency and high standards within the industry.
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