Pensions need dose of reality
19 September 2017
Matthew Phillips, managing director at Thomas Miller Investment, says the industry should focus on highlighting the importance, simplicity and flexibility of pensions to encourage clients to save.
People need to recognise the crucial role pensions play in enabling them to retire, and start by making small contributions, Phillips says.
“Lots of people knock pensions. In recent weeks we have seen headlines about younger people not being able to retire because they will not be able to accumulate enough. Let’s stop that.
“We all make a choice as to where our income goes and most of these will prioritise immediate needs over future ones.”
Phillips says that too often, people believe pensions are hard to understand but the fact they are simply a saving plan with tax breaks should be made clear. Those in workplace pensions should also be encouraged to understand their contribution levels to ensure they do not miss out on what they are entitled to.
He argues individuals should be encouraged to start with a “very small amount” so that they get into the habit of putting away a regular sum, no matter how small.
“Let’s start by getting rid of the clichéd idea of retirement that most people hold. The idea that conjures up images of gold watches, golf courses and cruises all at the age of 65. In order to fund this lifestyle, it’s true that you are going to have to accumulate quite a large sum of money. However, in our experience the majority of retirees we see do not retire this way,” he explains.
Helping individuals to understand that they can often take a tiered approach to retirement, moving to fewer hours in the workplace and, therefore, still earning beyond the age of 65, while having more freedom means that even a small amount of saving will give them greater flexibility later in life.
He adds: “The advent of pensions is something that should be celebrated and cherished throughout the UK in the same way as the NHS. It allowed ordinary people to have more security in later life and meant that they could actually retire.”
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