James Coney  

'Pension' means different things to different people

James Coney

James Coney

We need to find a new way to talk about pensions.

I hear it all the time from advisers.

I have said it myself in these pages many times, too.

It was at the heart of a speech I made when recently launching a new personal finance website designed to explain money concepts in as easy a form as possible.

My argument has long been that what a pension means to people differs from person to person.

A pension is what you and your employer pay into; it is the money that builds up inside it; it is an annuity; it is a drawdown income; it is your 25 per cent lump sum.

It is what the state pays you every week; it is the date of your retirement.

Essentially my argument is that one word encompasses a lot of different products.

The nub of the case for advisers revolves around life stages: someone starting out putting money away for retirement; someone who invests in equities generally; someone approaching retirement; and someone who is taking their nest egg.

These, advisers say, should not all be characterised as the same type of person, which calling them ‘pension savers’ certainly does.

Perhaps the press are to blame here, as there is always a disconnect between how advisers think the media should explain people’s very specific life situation, and the more general broad-brush approach that most of the press adopts.

But really this is a reflection of how complicated everything has become for savers and investors.

What you might call competition, others would call confusion.

There are so many choices for investors, so many routes to retirement that having one word to sum it all up just seems odd, and this is before you weigh in the different outcomes and rules you get from defined benefit and defined contribution schemes.

Even the notion of in and pre-retirement is redundant these days, with people drawing down different types of pension at different times in order to maximise their returns.

Whatever your view on where the fault lies in the language of retirement, it is time for change.

Perhaps the answer has to be on building a retirement pot, and producing a retirement income.

Let’s leave the word ‘pension’ for the tax-free wrapper that we keep the money in and for the income the state pays us.

Only then can we really get savers focused on what they need to do build up a pot of money, and then what they can do to make it last as long as possible.

Poor timing

There have been two great attempts at marketing spin in the past few weeks.

The first came from an equity release company, who, just one week into the crisis, said they had seen a substantial uptick in requests to take money out.