Creating understanding

Dear Editor,

While from within the financial 'community' it is easy for us to understand not only the importance of pension and financial planning but also the variety of products on offer, it seems that for the wider population this is not the case.

Indeed, as our own research shows, public apathy, ignorance, and procrastination now pervades pensions to a dangerous extent. Increasingly, even those nearing the start of retirement are giving pensions the cold shoulder. More than a third (35%) of 45-54 year olds are willing to forgo a pension because they find the whole issue hugely dispiriting.

Yet even those wise enough to take out a pension could face an equally precarious and underprovided-for retirement: too many believe that simply having a pension is enough. More than half of the people surveyed, in fact, admit to having no idea about whether what they're putting aside now will be enough to ensure the kind of lifestyle they want to enjoy later, which is alarming, especially when you consider that the age group with the highest pension uptake is also the least attentive: while 68% of 35-44 year olds have a pension, a shocking 60% of them liken their haphazard approach to planning for retirement to shooting in the dark'.

A combination of cynicism and misconception has contributed to the current antipathy towards pensions. Poor decisions and serial mis-selling has undermined public confidence to such an extent that roughly a third doubt whether there is any point having one.

Added to widespread scepticism is a worrying level of misunderstanding and confusion. Overall, many are unaware of even the single most important benefit of a pension - tax relief. More than one in ten said that they failed to see the point of a pension when you could instead simply put savings in a bank account. A quarter of young people agreed.

Lack of interest, therefore, follows partly from lack of understanding. So if we are to restore confidence and renew interest in pensions, we must first undertake a commitment to educate and explain its value - without the jargon. Then we must help employers to ensure that the retirement benefits that they do offer are effectively communicated to their staff in a way that they understand and through a channel that suits their needs.

Duncan Howorth is managing director at JLT Benefit Solutions.