To paraphrase Oscar
Wilde: “Pensions are wasted on the Young”.
The Question is Why?
A mini-survey was
carried out on 67 individuals in different industry sectors under the age of 35
with some of the findings coming as a surprise. The purpose of this survey was
to derive an idea of the opinions of those individuals on saving for their
future.
The findings
indicated the youth of today are focused on ‘living for the now’. However, when
asked about their idea of what retirement means, they think of a time which is
fun, filled with holidays and, specifically, not having to work. The State
pension nowadays is less than half the current average salary of those in
employment in this age group, which poses the question ‘how do they expect to
fund for this expected lifestyle?’
The results of the
survey reveal that the majority of these individuals do not have a pension
scheme. Just fewer than half the participants claim that their employer company
does not provide a pension scheme. It was surprising to note that a large
amount of these individuals stated they have not been approached by their
employer and advised of the availability of a mechanism to begin saving for
their retirement. It is a mandatory requirement
that all employers offer a company scheme or a standard PRSA, this leads us to
believe the availability of such schemes are not sufficiently promoted.
When the sample was
asked if they would save themselves for retirement, responses were negative,
consisting of phrases such as “too
costly”, “can’t afford to” and “maybe in the future”.
The lack of saving
earlier in life will mean a significant amount of stress will be placed on the
amount to be contributed to make up the same expected salary for retirement. Take
for example, two people, both earning €40,000 per annum and expecting to get a
pension of 68% of that salary (€24,600). One decides to begin saving at 26, the
other at 41. To achieve the same outcome they will both have very different
contribution amounts:
It is important to focus on providing guidance to younger people
to invest in their pension as this will benefit them later in life when they may
need more disposable income.
This issue was discussed directly with some of the
participants who worked in financial services and who were therefore
professionally aware of the need for pension savings but had not yet undertaken
any pension planning themselves.
Whilst validating some of the comments outlined above these
participants also offered some comments on the approach of the industry itself
to the issue:
“If pensions are so important why do they appear at the end
of the Manual?”
“When we were presented with details of the financial
planning pyramid – pensions always appeared at the bottom”.
Portions of the survey undertaken focused on particular
features that could be included in pension products to make them of more
interest to young people. This will form the subject of a later article.
However both the general comments and the specific feedback
from those in the industry highlighted a number of points about communication:
- We as an industry are not clear in the message we give to young people on this topic
- Whilst employers are obliged to provide access to a pension mechanism, greater work needs to be done around communicating this to the younger audience
The under 35s are often referred to as the “Apple
Generation”. This reflects the significance of technology and social media to
their everyday lives. Perhaps the real message coming from this survey is that
greater use of such tools is necessary if we want to communicate fully to this
generation.
By
Emma Herrity, Trustee Administrator, Independent Trustee Limited.
