Better financial literacy and engagement in pensions will not solve the savings gap when so many younger people - particularly women and the self-employed - simply cannot afford to save for their retirement, pension experts have said.
The view was put forward by a panel of pension experts at the Second National ILC-UK Retirement Income Summit.
Jemima Olchawski, head of policy and insight at the Fawcett Society, said recent research conducted by her organisation found young people had a “hierarchical” view of savings, and pensions were low on the list.
“First they’re going to pay off their student loan, then they’re going to sort out a deposit on a house. And then they’ll think about their pension. But of course we all know that, increasingly, your chances of achieving the first two of those, let alone the third, are slim.”
For women, she said there was a fourth cost: the cost of having a family.
“We found that, for many of the women in our research, actually it’s on them that [the cost of a family] is going to hit rather than their partners.”
Kate Jopling, a policy and strategy consultant, said improving understanding was not a panacea, particularly for mothers and self-employed people.
“We often think that improving understanding is the route to better saving, so why, given that I have that understanding, am I not saving into a pension?”
As a self-employed person, she pointed out she was missing out not just on the nudge of auto-enrolment, but also the employer contribution. She added that “little people” were another reason.
“Childhood is hugely expensive, and no matter how progressive your household, when you are the one going back to work, you tend to tally up childcare costs against your earnings. So I think it’s a very significant factor in why men and women are not saving in this crucial period in our lives.”
One panellist suggested it was simply unrealistic to expect young people on average incomes to start contributing to a pension before they had paid off their mortgage. Average annual earnings are around £27,000.
Claire Walsh, a financial planner with Aspect8, dismissed this suggestion, saying it was “about trying to get a balance”. However, she said provisions needed to be made to ensure the self-employed were being nudged into saving for a pension.
“I think there are something like 3 million people in the UK who are self-employed, and they’ve not been covered by auto-enrolment at all.” She said the government could create a version of Nest for self-employed people, and say to them, “This is where you should put your money.”
“People want clear messages,” she said.
A spokesperson for Nest pointed out that the scheme is open to the self-employed.
james.fernyhough@ft.com
