With a new report suggesting that adults in the UK have ‘worrying levels’ of understanding when it comes to pensions, Stuart Price, Partner and Actuary at Quantum Advisory, is calling for pensions to be taught in schools.
The survey, by Tilney, found that 20% of those questioned had never checked their current workplace pension and a quarter didn’t know if their current scheme is a defined benefit or defined contribution arrangement.
Stuart Price says: “The results of the survey are extremely troubling, although I don’t think they come as a surprise. Nearly 70 per cent of respondents said they find pension terms confusing, and, unless you take the time to understand your pension or have it explained to you, then of course it’s going to be confusing.
“The planned introduction of the Pensions Dashboard, planned to be introduced in 2019, aims to provide a simplified way for individuals to see all their pension savings in one place. The Pensions Dashboard will no doubt help to address much of the perplexity as it will show an individual all their private pension arrangements alongside their State Pension and will indicate the overall income they could expect in retirement. The figures may shock some people and help them realise they need to be saving more for their retirement than they realise.”
Stuart’s rule of thumb to give people the best chance of a decent income in retirement, is to half your age and pay in that percentage of your salary into a defined contribution arrangement. So, for a 30 year old, the total contribution from the worker and employer should total 15%.
Stuart continued: “Although the Pensions Dashboard should help clear some confusion when it comes to the pension minefield, I do think the problem requires more action, particularly with the younger generation entering the workforce. Explaining about pensions should be taught in school alongside business studies and careers advice. People shouldn’t drift through their working years thinking their pension is someone else’s problem, then near their retirement to find they haven’t got enough money to live on. They should be fully equipped with all the knowledge before they even start work to ensure they can take control from the beginning. Unfortunately, relying on the State Pension will simply not be an option when they old enough to retire.”
Stuart Price, is Partner and Actuary at Quantum Advisory, which has offices in Amersham, Birmingham, Bristol, Cardiff, and London. Quantum provides pension and employee benefits services to employers, scheme trustees and members.