21/04/2011
By Ilonka Oudenampsen
The Government should educate school leavers on pensions in order to avoid a future pensions crisis, according to a group of leading UK pension experts.
In the Clear Path Analysis report DC Pension Design and Investment, they suggested engagement with British youth has to be dramatically and immediately improved, through use of social media and technology such as text messages, webinars, Facebook and Twitter. The Government has so far avoided making financial education a central pillar of their economic recovery plans so the experts believe that it is now up to the industry itself to push ahead.
The report stated that the industry should be calling for broader education and awareness of the need for pension scheme members to contribute more and to take charge of their investment directions, if not necessarily their investment decisions.
Pete Harris, pensions manager at Telent, spoke of the need to really get through to young people: “I think it is worth thinking about, to a limited extent, frightening people... It’s about finding a gentle, less extreme way of saying ‘Do you want to die in poverty or not?’”
Martin Palmer, head of corporate pensions marketing at Friends Life, said: “We need to think about getting people on board to start off with but then engaging them at different stages of their lifetime. When people take out their plan in their 20’s they can have an unrealistic expectation of when they might retire, probably thinking the retirement age will be 60. They then set their target date or lifestyle funds with that age in mind and move into fixed income securities at the wrong time.”
Julian Lyne, head of global consultants & UK institutional business at F&C Asset Management, added: “The question here is about education and how you tell members about their investment options. I don’t think we need to go into details about using swaps etc. to match the interest and inflation risk of an annuity, but what members need to understand is that we’re reducing risk at retirement and what that means is having effective communication, education and engagement, and so giving them more certainty.”
