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MSE News: Young people 'confused by pensions'
in Pensions, annuities & retirement planning
77 replies 6.5K views
Former_MSE_Helen Former MSE
"Millions of young Britons are more likely to understand a foreign language than pensions jargon, a study suggests ..."
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Young people 'confused by pensions'
Young people 'confused by pensions'
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Young being confused by pensions? Or just can't be bothered to look things up?
The term "Annuities" isn't difficult to understand. It's paying a lump sum and in return you get a regular payment for the rest of your life.
Auto-enrolment. Again, not difficult. People are auto enrolled into a pension scheme.
These terms are not confusing as the study seems to think. It's more likely the fact that young people don't care to look them up or understand.
If someone came up to me and asked me if I understood what offside is in football, and I said no, that doesn't mean that it's too confusing, it just means I can't be bothered to learn what it means.
Everybody knows that they should get a pension from work if their employer is any good, Everyone knows that you save into a pension in order to get an income from it when you retire.
What people don't know is about the open market option, they don't like 8 pages of legal disclaimers when all they need to know is their current fund value and what that is likely to pay out when they retire.
People deal in facts, insurance companies deal in policies. That's why a good deal of people employ middlemen like me (IFA) in order to cut through all the jargon and explain it in laymans terms. In addition the point of a good IFA is they make you consider things that you wouldn't normally consider.
I would question how many people have actually sat down and worked out how much income they need in retirement and when they will be able to retire in an acceptible fashion.
Out of the hundred or so new clients I saw last year about two had actually considered these issues.
The process is also a problem, everyone can look up the term 'white paper' and know what it means, however actually submitting something that may be considered as a white paper is a perilous process. I think people would rather get on with their day job and family life than take a week off a year just to sort out their finances, again another reason why I'm in business.
Going back to what Matthew said; if the UK economy is rubbish, invest in a different one. Most pensions are rubbish because people do not build a good investment portfolio within it and are surprised when their mediocre funds end up being mediocre. A pension is simply a tax wrapper, that is all. It's another type of investment with significant tax advantages.
We need to move away from the idea of final salary pensions, people do not seem to have cottoned onto the fact that final salary pensions just don't exist for the vast majority of people. Nowadays pensions are just investments, nothing more and nothing less.
If you leave it in the bank, however, you are simply paying bankers bonuses.
1) people are not saving enough for their retirement
2) we have reduced interest rates to virtually zero so that there is little point in saving at all.
The other pair of contradictory messages from the government are:
1) The economic crisis was caused by profligate lending
2) We can overcome the crisis by encouraging more lending.
The problem with pensions is lots of it is guesswork as it's so far in the future, especially for the age in the report, it's difficult to marry up future values to how much they pay in.... we hear so much negative news on pensions and people are wary about paying for something over such a long time to have made a bad choice, as it can't be undone in a short timespan.....
What it may grow to in time, I know not what.
Daniel Defoe: 1725.
That is because you dont understand them and clearly havent looked into them. You prove one point of the article.
You don't know how to operate an Iphone until you get one and learn about it. You dont know how to drive a car until you learn. You dont know how the engine is serviced/repaired but you still have one as you get someone that does to do those things.
The fault, if there is one, is that society today wants everything dumbed down and the responsibility to be elsewhere. That said, I have seen more young people in the last couple of years who seem to have their heads screwed on than I did in earlier years.
And I find it very difficult to know if it's worthwhile joining an employer pension or a waste of time given that the work that I am finding/being offered at the moment is short term temporary fixed term, sometimes extended, sometimes not, and not always with the same employer/pension scheme/salary/industry/region etc
Do ISAs confuse you? Do savings accounts confuse you?
Have you ever asked anyone to explain it to you? Have you made any attempt yourself to understand?
It is actually very easy to get the principle. The more you pay in the more you get back. If you dont pay enough in then you will not have enough to provide a suitable retirement income. If the employer pays into it then you get free money. Is free money a good idea or a bad idea?