A great infographic from Schroders and the Policy Exchange caught my eye this week. (View The UK is sitting on a pensions time-bomb as people are failing to save enough graphic).
It shows three pigs each of a different size.
Using an average salary of £27,000 the Policy Exchange worked out three pension pot scenarios, represented by these pigs.
The smallest piglet represents the size of an average pensions pot that people in the UK retire with.
The middle-sized piggy represents a pot of someone who has saved 8% over 40 years.
The big pig shows the size of pot that an average earner might need.
I am more likely to remember these pot sizes now that the three little pigs have made the differences so shockingly clear.
So how do we gently get people to build a solid pot that will keep the wolf from the door in retirement? Like scary tales of wolves, poverty in retirement is often an unseen terror until it is upon us.
We can huff and puff all we want, but scaring people is not the solution.
I favour continuing to use nudge inertia to get people into the 8% savings levels. But as the Policy Exchange’s pigs show, we then need to build on that 8%. It suggests moving up to 12% contributions over five years.
To me that still isn’t far enough for those beyond their twenties. But it is a healthy step in the right direction.
Can we do it?
Debi O’Donovan
Editor
Employee Benefits
Twitter: @DebiODonovan