PIMFA & The Wisdom Council research highlights the urgent need for consumer pension & savings education
Working in conjunction with the Wisdom Council (TWC), PIMFA – the UK’s leading wealth management and financial advice association – have published research results from a recent study that investigated critical issues with the long-term savings market.
The report reflects both the insights from conversations with customers and the results of a wider quantitative survey conducted with over 2000 UK individuals, including retirees but chiefly generations who have yet to reach the traditional retirement phase, helping the industry to understand how well they are rising to the savings challenge.
Some of the key findings made for both interesting and, in some cases, disturbing reading;
Consumers are saving too little and taking too little risk as the consumer pension and savings market still feels alien to them. This, in many cases, is about trust, or rather the lack of it, which is another worrying finding of the report.
Engaging and relevant education is needed, which also needs to be refreshing and easy to understand as current methods have so far not worked. Financial education only became part of the curriculum in England in 2014 — too late to benefit most millennials, not to mention those of us who came before. At the time, those who campaigned for its implementation, including the journalist Martin Lewis (MoneySavingExpert.com), no doubt felt a sense of achievement. However, he obviously feels that there is a lack of ‘bite’ in the initiative when he says that “No resource or teacher training has been put into it”. Indeed, 75% of the teachers surveyed by the Money Charity in 2016 reported that it had had little or no effect because they were not given the training to carry it out.
Gender gap rears its head once more, making women appear vulnerable. In particular, they showed lower levels of confidence in their financial knowledge. According to The Guardian, the gender gap in UK retirement incomes has widened dramatically over the last decade, with the average single woman now £85 a week behind her male counterpart, according to new data.
Finally, misconceptions appear to be rife. Around 40% of millennials in TWC’s study think they have a defined benefit scheme that will pay them a pension in retirement when the latest ONS data suggests that less than 1 in 5 under-29s have an element of a final salary pension.
The report reflects both the insights from conversations with customers and the results of a wider quantitative survey conducted with over 2000 UK individuals, including retirees but chiefly generations who have yet to reach the traditional retirement phase, helping to understand how well they are rising to the savings challenge.
Results showed that despite the fact that many younger generations are struggling to get on to the housing ladder and older generations recognise the need to fund the cost of care, almost two fifths (39%) cited equity in their house as the principle source of funding to support their retirement. The Government has rescheduled the release of its Green Paper on Social Care until the autumn, leading almost half of the over-45 demographic to delay their care planning until the rules are finally introduced.
Further insights from the research revealed that despite the pressure on cost of living and savings over 60% still expect to retire by their 60’s. Nevertheless, 38% do see full retirement happening beyond 70, perhaps suggesting a rising expectation that retirement will not be an immediate event, but rather a period of transition – sometimes referred to as the ‘grey glide’. Particularly reflective of the qualitative nature of the research, the term ‘pension’ is seen by many as an out-dated term.
PIMFA CEO, Liz Field said:
“For a large proportion of respondents the main methods of saving for retirement remains in an over reliance on their house and holding cash. Risk aversion remains an issue with few individuals balancing this equation by taking calculated risks to grow their pot.”
“Engaging and relevant education is key to helping consumers see the wider picture and how investment and financial advice can benefit them when planning their personal financial futures – there is a lot of work still needed to change these basic views”.
Anna Lane, CEO of The Wisdom Council says:
“We see growing differences in life stages between generations and shifts in retirement patterns. The ‘grey glide’ is the new reality – have manufacturers caught up with the need to refresh and innovate to allow that flexibility? We think there is more to do on that score and our study raises some of those questions.
“Ultimately, customers want clarity, simple products that flex with them and communication that speaks to them as human beings. Perhaps digital delivery, machine learning, behavioural science and creative product innovation could be the perfect storm that finally makes long-term saving not only accessible but exciting”
To read the full report, please click here