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Pension Awareness Day: Winning over the hearts and minds of UK savers

In the run-up to Pension Awareness Day 2018, IFoA Policy Manager Henry Thompson challenges everyone to check the value of their pension

Henry

Last week, Public Health England were encouraging the public to take an online test to check the age of their heart. The test, targeted at adults over the age of 30, allows individuals to find out their heart age to indicate if they are at increased risk of suffering a heart attack or a stroke.

According to analysis conducted by PHE shortly after the test went live, 78% of the two million people who have already taken the heart age test have a heart age higher than their actual age, putting them at greater risk of an early death. Of those, 34% were more than five years over their actual age and 14% at least 10 years higher.

This is proving to be a useful way of encouraging individuals to assess their health, think about the consequences of their action (or inaction, as is likely the case…) and to take steps to address any potential issues through a change in lifestyle. The vox pops from various news channels covering the test demonstrated how effective this shock and awe tactic can be in changing human behaviour, particularly when personalised.

Time will tell whether the long-term physical health of the nation will improve as a result of initiatives like this, but what about our financial health?

In the pensions world, Saturday 15 September marks a similar awareness-raising initiative: Pensions Awareness Day 2018.

Pension Awareness Day is an annual, award-winning campaign, the aim of which is to promote the importance of saving for the future and to alert the nation that it is not saving enough for retirement. #PAD2018 takes inspiration from similar campaigns in Scandinavia and most notably the Netherlands which is thought to have one of the most successful pensions systems in the world.

Whilst there have been steps taken in getting more people to save, most notably through automatic enrolment (ONS figures show the number of people saving into a pension is up to 15.1 million in 2016),  the amount people are saving continues to flat line. And with the ongoing closure of defined benefit pension schemes, many of today’s savers are unlikely to be able to rely on the generous company pensions of yesteryear.

That’s why the pensions industry has spent the past few years investigating the best way to communicate with savers, and how this might translate into improved savings habits. You can read the IFoA’s contribution to the debate here or take part in our forthcoming webinar on Minimising Longevity and Investment Risk while Optimising Future Pension Plans here.

The aim is to get people up and down the country taking the crucial first step towards active engagement with their pension: actually acknowledging that it exists. The PAD campaign will be taking place on social media this week to try and catch the attention of young savers with their heads buried in the Twitter-sphere.

The PAD team will also be on the road in a double decker bus, visiting city centres around the country this week with pensions experts on hand to answer questions and offer out information and guidance to passers-by.

But we also want to go one step further.

We’re challenging everyone this Pension Awareness Day to make the effort to check the value of their pension(s). It might not sound like a very tough challenge but the aim is to encourage people to get into the habit of thinking about the later life they want to lead and how they will need to finance it. Applying this ‘bottom-up approach’ to the mind-set of retirement planning should help savers understand how close they are to reaching their goals, and what steps they would need to take to ensure an adequate retirement income if they are falling short of their goals.

This small step may even foster the new behaviours that online banking has ushered in, with individuals now checking their balance regularly simply because the information is at their fingertips. This new age of engagement through technology can only be a good thing, particuarly for a topic that typically engenders inertia and apathy – one of many reasons why we are fully supportive of the pensions dashboard concept.

And as with exercise or improving your diet, we want to inform people that it is never too late to act. In the same way that incremental increases in physical activity can add years to someone’s life, an increase in pension contributions can go a long way to improving an individual’s ability to retire comfortably. For example increasing pension contributions by 1% e.g. from 3% of salary per annum to 4%, could provide a 33% bigger pension pot by the time you retire.

So this Pensions Awareness Day, make the small effort to get to know your pension a little better. Acting sooner rather than later might remove the element of surprise when you suddenly find yourself planning your retirement and realise you have the pension of an 18 year old…