Happily ever after is for fairy tales and reality TV shows, we need to stop pretending there is a pensions prince charming coming to rescue DC savers and start talking to them honestly about what the future might hold.
Last week’s ‘revelations’ that DC savers are at risk of an inadequate retirement were about as shocking as discovering that E4’s Married at First Sight is actually entertainment and not an experiment to find true love.
In case you missed it, the PPI’s 2023 DC Future Book reported: “Future retirees are unlikely to accrue sufficient DC savings to achieve both an adequate and sustainable retirement income”.
The perfect storm
What that means is the retirement reality for a 22-year-old today is stark: die young or live poor. The PPI’s report makes for powerful reading, bringing into sharp focus the combined pressures of:
- increasing longevity;
- falling home ownership (and the impact that has on housing costs into retirement); and
- greater levels of individual exposure to risk.
Together with significantly lower employer contributions than in previous generations, this creates a perfect storm for young pension savers.
The pensions adequacy crisis is nothing new
But we know this don’t we? We in the pensions industry nod along – “Yes,” we say, “people need to save more” and we might even add sagely, “saving when you are younger is so beneficial!” and then we move on.
I’m not moving on just yet.
We are failing DC savers. We know the vast majority are not saving enough, yet we stay quiet.
Granted, it’s a hard message to deliver: “Yes, you are working hard and doing your best to save. But it’s probably still not going to be enough.”
And I think we stay silent out of fear of the alternative – what will people do? Stop saving? Surely putting something away is better than nothing. After all, we don’t want people to miss out on the free money of employer contributions.
But that’s not our call. We must support people to make their own decisions, saying nothing simply takes the paternalistic DB approach to pensions and applies it – completely inappropriately – to a DC world. The change from DB to DC has shifted the risk onto individuals, but without also giving them the tools and information to be able to make informed decisions.
We can do better
We must treat people like adults. Yes, pensions can be complicated, but we’ve got some great tools to help. Take Gallagher’s Hitting the Target modeller, which helps users to pull together a picture of the kind of retirement they want, and tells them how much money they will need to achieve their target.
It’s time to speak up. Have honest conversations with your employees about what their current pension savings are really going to deliver for them, and equip your people with the information and tools they need to make decisions which are best for them and their families. We can help, with engagement campaigns, contributions collateral and of course educational tools and videos.
Happily ever after is for fairy tales and reality TV shows, we need to stop pretending there is a pensions prince charming coming to rescue DC savers and start talking to them honestly about what the future might hold.
For expert guidance on communicating complex messages about workplace pension contributions, contact us today.