Learn Money Week Guest Blog – Pensions

Written by , March 13, 2014

  On each day of our Learn Money Week financial education campaign, we will be featuring a...


On each day of our Learn Money Week financial education campaign, we will be featuring a guest blog from key stakeholders, i.e. the people who collectively help achieve financial literacy.

Today we present the thoughts of David Brooks from Broadstone on the financial product young people really need to know about – it is the pension perspective:

Pensions suffer from a few key perceptions that can be problematic but can be solved through education.

They constitute some of the major financial decisions of your life. The decisions individuals make through their working lifetime will directly determine the timing and quality of their retirement years.

Pensions are often complicated

Pensions are complicated (sometimes unnecessarily so) and come into contact with an individual’s ability to make a number of decisions around:

  • budgeting (how much to save)
  • planning (when to save)
  • strategy and risk assessment (investment choices)

Pensions are boring

I am amazed but when I mention I work in pensions at parties (yes we pensions people do go out sometimes) people glaze over. The main reason that pensions are boring is that procrastination power is very strong and other more immediate calls on an individual’s’ income will always seem to be more attractive, and in some cases they’ll be right, but it is clear that the earlier you start the better the outcome will be.

Pensions will affect nearly everyone

All of us will have some aspiration to stop work at some point and while many think their house is their pension (it isn’t, it’s your home!) having a pension fund is the most efficient method to plan for that eventuality. To have a pension you need to defer your income now (in the most simplest sense that’s what a pension is, deferred income).

There are lots of different types of pensions and employers are now obliged to get involved and provide them for most of their workforce via the Government’s auto-enrolment legislation. So a pension should be an everyday occurrence for almost all of us. Understanding what is happening and why will make sure that people make the informed and correct decision.

Financial Education is the answer 

To my mind the answer to all of these problems is clear, and that is through education.

People should be given the skills to evaluate the importance of planning their financial future by appreciating some of the benefits of pensions (tax breaks, the employer contribution and compound interest). This begins with the skills to budget, plan and assess strategy all the things that MyBnk do for their young people.

Ok, I concede that pensions will still be boring but if young people are given the ability to understand the importance of starting early, deferring some of their income for their future, together with taking some extra money from their employer and the tax man, then we will have people that will be able to enjoy their retirement years. As a pensions consultant that it is at the heart of what I do and I see the work that MyBnk do as key to achieving that.

David Brooks.


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