Nudge towards savings is changing pension pots
Small pension pots are the way of the future, the question is how to best manage them.
There is a lot of talk these days about small pension pots. It is not surprising I suppose what with auto-enrolment coming just over the horizon.
It does not take much imagination to work out that if the whole employed workforce in the UK is going to be nudged into saving in private-sector workplace pension schemes, but not nudged that hard that they have to stay in them, then small pension pots are likely to be on the increase in something we currently call ‘the future’.
Auto-enrolment will get many more people saving even though some people may become serial opter-outers, but even those who intend to stay saving in a pension are likely to end up with loads of pension pots for their trouble. The reason for that is not too hard to fathom out either; people do not stay in one job all their lives like people did in something called ‘the good old days’. People these days have got itchy feet job-wise and move around all the time.
When real-life people move jobs, particularly when they are young it is not likely that sorting their pension affairs out will be the top priority. They are much more likely to be interested in getting their holiday entitlement and a million other priorities sorted first. That is the thing about pensions, they only really appeal to people when they reach a stage in life called ‘old’. Recent surveys of employees who are lucky enough to be in generous company pension schemes today show that their knowledge of how much their employers pay into their schemes for them is lamentably low.
Many do not even know their employers pay in anything for them. Those sorts of stats have been bothering me a lot lately if I am being honest. We keep hearing (normally in the Sunday papers) that we are leaving a recent past that in pension terms we will soon realise was some kind of ‘golden age’. In that golden age of pensions everything was fabulous. Employers were generous, employees were happy and contented and all was well with the world.
I am not so sure that was ever really true, or anywhere near the truth.We have come from an age when pensions were easier for employers to provide and where there were no real risks to the company balance-sheet if things went pear-shaped, that is true. But those days were over almost as soon as we entered the 21st century. But did the pensions industry of that long-ago past age do a good job of explaining the benefits of pension schemes to scheme members?
Put another way, did the average pension scheme member in the 1970s and 1980s (at the height of the supposed golden age) appreciate the very real generosity of their employers if they provided pensions? Or was it all taken for granted? I know what I think the answers to those questions are; for all I know those of you still reading this know what your answers are too. I think generous pensions provided by generous employers have only made it into the national consciousness lately because they are in danger of going out of fashion; you do not know what you have got till it has gone; that kind of thing.