Engaging the young to save for a pension
It is a known fact that engaging younger generations in the task of saving for the future is essential but incredibly difficult. This is the case despite the increasing proliferation of technology designed to do just that.
The latest figures from the Department for Work and Pensions show that three-quarters of the UK's employees are participating in auto enrolment pensions schemes. However, new research from Prudential, shows that despite the successes of auto-enrolment, more than half of under-30s only contribute the minimum required to their pension or have no retirement savings at all.
The Prudential study on the pension dangers for millennials, showed that a survey of 1,052 respondents found that millennials cannot afford to save into a pension (24%), find the pension rules confusing (33%), or wish their employer did a better job of explaining pensions (53%). Prudential concludes that encouraging those under 30 to save enough for their retirement is a "challenge".
Getting on the housing ladder, clearing student debt and lower salaries mean that for millennials saving for the long term is going to be a low priority. It occurs to me that one potentially important way of reaching the young is through an estate planning strategy which involves our clients and our clients’ beneficiaries.
We need to recognise that self-interest is a powerful motivator and parents reaching late retirement may have to hand-hold (or perhaps, frogmarch) their offspring into attending joint financial planning meetings. We need the face-to-face opportunity to illustrate to the young that today’s younger workers have the most to gain from auto-enrolment because they can spend their whole careers contributing.
The importance of an early start to pension saving is highlighted by new figures from the Office of National Statistics which show that life expectancy continues to rise. Life expectancy for a 65-year old man is now 18.7 years and for a woman it is 21.1 years.
Essentially, this brings us full circle to the way the financial services sector communicates with millennials. Robo-advice will take time and as advisers, we need to take all current opportunities to sell the idea of financial advice as a valuable gift to our clients' children.
Our clients are going to great lengths to ensure their hard-earned wealth is passed to their loved ones in as efficient a way as possible. We must encourage these clients to help us advise their children – to ensure they keep what they have been given but also to help educate them in making their own money work for them through their lives.
It may be the tip of the iceberg, but if even a few more young people start saving for a pension, then we have made progress.