Frances Corbett: Financial education

Some people are still not convinced of the importance of saving for retirement, so they need to be educated in a relevant and engaging way

People are living longer. Even if we work past our late 60s, many of us will, hopefully, enjoy at least 20 years in retirement and the income we will need has to be earned while working.

Despite this, about seven million people are not convinced and seem unconcerned about being financially insecure in their old age. Some say pensions are too complicated to consider or only notice the failures rather than the thousands of pension schemes that do deliver. Others argue that growing older means having a worse time, looking less attractive, having less fun, being less energetic and, worse still, getting ill.

Ageing needs championing. The media, the pensions industry and society in general need to “talk up” getting older. You will probably live a lot longer than your parents and grandparents. Isn’t that fantastic?

Next, we need to work hard to highlight successes and promote the benefits of a financially secure future. The “eat healthy and exercise” campaigners have managed to encourage many to plan ahead for a healthy lifestyle in old age, and the pensions industry needs to follow suit.

These points need making: planning ahead could help you take control of your future; if you save for your future, you are more likely to have choices and a lifestyle you can enjoy; if you start to save when you are young, your savings have more time to grow and, in the long run, you may even be able to save less; and saving over your working lifetime may make your saving easier to manage.

Many promote informed decision-making as the way to engage people with pension saving. “If people knew how pension savings worked, they would understand them better, be more able to take informed decisions and, as a result, be more inclined to save.” Too often this has led to assumptions about what to tell people rather than concentrating on what they actually need to know.

Of course, people should have the facts before taking decisions. But individuals who are not convinced that planning and saving for the future is a good idea are less likely to want to understand. And even if someone is wedded to the concept of saving, they will not generally be motivated to sift through a lot of information.

All too often, facts are issued as a job lot and scheme members are expected to identify what is relevant to their circumstances, and/or retain information to come back to in the future if and when they need to.

Volume a barrier

Volume can also be a barrier. For example, details included because the law and/or pension scheme rules require disclosure, or because the practitioner wants to share everything they know. Greater thought should be given to the reasons why information may be needed and communications should be tailored accordingly.

Signposting will help the employee who may need to know which facts apply and to be told what action, if any, may be taken once the facts have been gained. Even if the individual holds the right information already, it may need to be interpreted or explained.

Armed with the relevant facts, the individual may still need coaching on the choices available, the consequences of making particular choices, and the factors that should be taken into consideration before making a decision.

Full advice should be offered only if the practitioner providing it is fully authorised, can consider an individual’s personal circumstances and recommend the best action.

And then there is the language. Sadly, sometimes it is easier to use what someone else has written, either because the communicator does not really understand the issues or because no thought is given to why the recipient needs the information. This often means the impact of the communication is lost. If a glossary is needed to explain the facts to members, the wrong words are being used.

So what needs to change? Retirement planning and getting older need to be marketed more positively and public confidence in pensions encouraged. Greater emphasis should be put on helping people engage with their own retirement saving and less on pushing facts that may not be relevant to their circumstances. Consider the reasons why facts are needed and then tailor the volume and language accordingly.

Frances Corbett is educational development manager at the National Association of Pension Funds

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