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Not saving is the only wrong pension decision you can make
A survey by the National Employment Savings Trust shows 71% of people don't save because they are scared of making the wrong decision.
by Michelle McGagh on Jun 22, 2012 at 08:00
When you think about your retirement, what do you imagine yourself doing? Sailing off on a round-the-world cruise, spending more time with the grandchildren or taking up a daredevil hobby?
As part of its ‘Tomorrow is worth saving for’ marketing campaign, the government-run pension scheme, the National Employment Savings Trust (Nest), has been asking consumers how they would like to spend their retirement.
We can all think of exciting ways to spend our twilight years but the truth is we are not saving enough to achieve the life we want to live in retirement.
Millions of people will be automatically enrolled into workplace pension schemes for the first time over the next three years, many of which will be put into Nest.
The government hopes that nudging people into workplace saving will kick-start a savings habit that will help people live a better life in retirement.
But if you had to guess why people had not saved anything before now you would probably say it’s because they can’t afford it – after all the financial crisis has taken its toll on most people’s finances.
However, you’d be wrong. According to the Nest survey, 71% of people who are not in a workplace pension say they don’t put enough aside because they don’t want to make the wrong decision about saving for retirement. A total of 47% of people said they didn’t know enough about what would be their best option.
You can’t blame people for being confused about their options. Savers are trying to find a decent return in a market where we have low interest and savings rates, historically low gilt returns and stockmarket turmoil.
And there is a concern that in the future we won’t know how to make the most of the money we do accumulate so we don’t even bother to start saving.
Nest said that is lack of confidence rather than unwillingness to save which is the reason why our savings culture is so lacking.
However, the survey also shows that 40% of people if they had extra cash available they would be more likely to spend it on a holiday, 20% would spend it on home improvements and the same number would use it for socialising.
Just 12% of people would put it away for retirement. This shows that while people may be baffled by pension options they also need to start prioritising their financial future ahead of short-term indulgences.
The majority of people who think they cannot afford to save could do so if they prioritise it, even if you are saving just £50 a month.
People don’t save because they are worried about making the wrong choice but when it come to pensions the only wrong decision is not saving at all.
More about this:
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- Nest attempts to demystify ‘baffling’ pensions
- Pensions: Nest won't work unless people are forced to save
- Drawdown v annuities: which pension strategy wins?
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- 50-year-olds need to double the amount they save
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- Why women cannot afford to put off pension saving
- How to boost your pension in retirement
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