Too late to start planning for retirement?

researchstudent

I'd be really grateful for forum members' thoughts and experiences.

My two questions are 'when is too late to really start planning for retirement'? And a follow-on - 'what can banks and other providers do to help those later in life to take positive action'?

My parents worked hard all their lives, but had little interest in financial matters, let alone pensions, and by their own admission were a bit 'head in the sand' about retirement, and left it very late to address it.

Influenced by their experience, I'm doing a study project for my university course looking at what more banks and other providers could/should do to support/encourage people later in life prepare better for retirement, particularly those who have struggled financially.

I'd be so grateful for any experience or views you could share. I feel it's such an important area and lots of people must be in a similar position.

Tina

Linton

Good questions....


It is never too late to start planning for the future, whether its retirement or anything else. The problem is that the later you leave it the fewer options you have. So for retirement you should ideally start as soon as you have sufficient income beyond that needed to provide the basics of survival to begin steadily saving.


Banks in particular and other providers in general can do very little to help people make sensible decisions on their future as they do not really have the expertise and have a vested interest or can be seen as having a vested interest. The people with that remit are regulated Independent Financial Advisors (IFAs) who are paid explicitly for giving advice. However getting advice from an expert is expensive and only financially viable if you are already fairly wealthy or have a large income.


Where banks and the other financial providers could help is to provide standard packages where currently diy money management is the only real option for most people. However it is not easy to see what these packages could be and whether the costs would be uneconomic for both the providers and the potential customers.



The only answer I can see is education in schools. The ability to manage your own money should be part of the standard curriculum. This is becoming increasingly essential as people enter retirement with lump sums in their pensions far beyond anything they have experienced before. What happens between now and when current school pupils reach retirement age is a serious open question.

MEM62

As for when is it too late? I feel that might actually be a moot question as retirement is inevitable and therefore planning is inevitable also. The reality is that some plan early in life, others a little later and then there are those that plan in a state of panic when they realise that they are a couple of years or even months away from retirement. Perhaps the question should be at what point is it too late to make any meaningful difference and it is absolutely a judgement call as to where you place your pin in that timeline.


The Government has already taken steps to address this via awareness campaigning and Auto Enrolment, albeit motivated by the fact that the state pension will, eventually, become unsustainable in it's current form.


As for financial institutions, as pensions are part of their product portfolio it is in their interest to promote them. This is a commercial driver and I am sure that they ensuring that they sell as many of these products as they can.

researchstudent

Linton wrote: »

Good questions....


It is never too late to start planning for the future, whether its retirement or anything else. The problem is that the later you leave it the fewer options you have. So for retirement you should ideally start as soon as you have sufficient income beyond that needed to provide the basics of survival to begin steadily saving.


Banks in particular and other providers in general can do very little to help people make sensible decisions on their future as they do not really have the expertise and have a vested interest or can be seen as having a vested interest. The people with that remit are regulated Independent Financial Advisors (IFAs) who are paid explicitly for giving advice. However getting advice from an expert is expensive and only financially viable if you are already fairly wealthy or have a large income.


Where banks and the other financial providers could help is to provide standard packages where currently diy money management is the only real option for most people. However it is not easy to see what these packages could be and whether the costs would be uneconomic for both the providers and the potential customers.



The only answer I can see is education in schools. The ability to manage your own money should be part of the standard curriculum. This is becoming increasingly essential as people enter retirement with lump sums in their pensions far beyond anything they have experienced before. What happens between now and when current school pupils reach retirement age is a serious open question.

Thank you for your very thoughtful reply. Yes, it does feel that more education has to be part of the answer for the future. But as you say, what about all the people - like my folks - who are way past that and are only now in need of help. And would probably be horrified by the amount of money regulated advice would cost. DIY money management won't be everybody's cup of tea - or ability.

researchstudent

MEM62 wrote: »

As for when is it too late? I feel that might actually be a moot question as retirement is inevitable and therefore planning is inevitable also. The reality is that some plan early in life, others a little later and then there are those that plan in a state of panic when they realise that they are a couple of years or even months away from retirement. Perhaps the question should be at what point is it too late to make any meaningful difference and it is absolutely a judgement call as to where you place your pin in that timeline.


The Government has already taken steps to address this via awareness campaigning and Auto Enrolment, albeit motivated by the fact that the state pension will, eventually, become unsustainable in it's current form.


As for financial institutions, as pensions are part of their product portfolio it is in their interest to promote them. This is a commercial driver and I am sure that they ensuring that they sell as many of these products as they can.

Thanks Mem62. Yes, 'too late to make a meaningful difference' is a good way to look at it. It's not very encouraging if you start late, don't have a high income, and basically the amount you can save doesn't really take you anywhere. Thanks for your comment.

barnstar2077

Completely agree about more financial education needed in schools. Really there needs to be lessons that cover all of the basics that a young adult needs to know, mortgages, ways of borrowing, pensions etc. As someone who didn't have someone helping me with decisions at that age I would have appreciated an education in things that would have really made a difference in my life. Now I know that schools can't replace good parenting, but unfortunately a lot of people don't have the support that they need at home.

tacpot12

researchstudent wrote: »

Thank you for your very thoughtful reply. Yes, it does feel that more education has to be part of the answer for the future. But as you say, what about all the people - like my folks - who are way past that and are only now in need of help. And would probably be horrified by the amount of money regulated advice would cost. DIY money management won't be everybody's cup of tea - or ability.

More education in schools is definitely the answer. Martin Lewis has been helping to promote a book on Financial Eduction; see here: https://www.moneysavingexpert.com/news/2018/11/financial-education-textbooks-funded-by-martin-land-in-english-s

The option for older folks is self-education, and asking for help from people who won't charge for helping. There are people who are happy to help friends and relatives learn about saving and investing. You don't have to be an IFA to help educate someone.

The Money Advice Service and PensionWise websites are good resources to start with.

atush

researchstudent wrote: »

Thank you for your very thoughtful reply. Yes, it does feel that more education has to be part of the answer for the future. But as you say, what about all the people - like my folks - who are way past that and are only now in need of help. And would probably be horrified by the amount of money regulated advice would cost. DIY money management won't be everybody's cup of tea - or ability.

First off budget. Stick to it. Second, dont get into debt (other than mtg). Pay off debt already held.

Lower costs. Are your parents ever switching utilities, insurance or just paying the high renewal costs? Do they fritter away money they dont have? Save this money instead.

Are they working still? Have they joined their employers pension scheme?

dscaj1

What helped me was I started work at the Post Office (1978) when I was 21 it was a condition of employment that I joined the Superannuation scheme as it was called then. I also had to join the union. I did not give much thought to pensions at that age, but I am jolly glad now that I had to join.

When I started the job it was an increase in pay from my previous job by £12.00 a week so I never missed the pension contribution. Nowadays it seems to be a option to join the pension scheme.

Even though employers have to operate their own pension scheme or the NEST pension scheme, employers have the right to opt out.

enthusiasticsaver

We planned early in life and gave pension payments as much priority as holidays, home improvements, cars and personal expenditure on hobbies. Obviously housing, utilities, emergency savings and food came first though. We raised the percentages as we could afford to and aimed eventually for 10% of income each. Employers contributions were on top of that and we had sufficient to retire at 58 so after 35 years of contributing for DH as no pension contributions during his apprenticeship or his first job but I nagged him to start paying in from 23 years old when we got married. I contributed from 18 as I knew banks had good pension schemes but had gaps due to maternity leaves, periods of part time working and staying at home with young children. I saved a larger proportion of my pay consequently.

I am not sure more financial education would help in spurring some people on to provide for retirement. Some people are planners, some are more live for today and some will say they just cannot afford it as they are on low incomes and need every penny to live off now and cannot think about the future. Even now on here I have read some people say pensions are expensive without realising that is a form of saving/investing for the future. They just moan about 3% or 5% being taken from their monthly salary. These are mainly those in debt though so that takes priority. One reason why I say debt is remedying mistakes of the past (excluding debt to invest like a mortgage) and investing/paying into a pension is planning for the future.

enthusiasticsaver

Personally I think if you have less than 5-10 years until retirement you have left it too late but the old saying better late than never still holds true.

Banks etc could stop using jargon and make pensions/investments more understandable for those of us who don't have a degree in economics. Government could stop moving goal posts so people trust pensions more and understand they provide a degree of certainty and choice for your future. Not 100% certain obviously but if people don't pay in they are not going to enjoy a comfortable retirement. Even with the new arrangements brought in the state pension is only around £155 per week. That would just about cover our utilities, council tax and food. We have no mortgage now but renters would need to find that on top or depend on benefits. Hardly a luxurious retirement.