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Retirement saving – compulsion inevitable says 7IM

19 September 2017

Seven Investment Management warned that more must be done to encourage people to save sufficiently, effectively and sooner for retirement and that the UK is on an educational journey that must end with compulsion.

Justin Urquhart Stewart, co-founder and head of Corporate Development 7IM (pictured), says: “The regulator is understandably concerned about the options and information available to people at the stage where they can access their pension. The interim findings are well researched and thoughtful, but unless we do more to get people to save and invest wisely long before this point, it’s a bit like fretting over the pressure of your tyres when they’re actually bald.

“There is a huge education job to be done, and good quality online retirement tools have an important role to play. But compulsion is key: whilst auto enrolment is a start, the UK is on a journey that has to end with compulsion.”

According to the FCA review, many individuals taking money out of their pensions appear to be moving the majority of it into cash products. For 7IM, this raises the concern that many investors may be taking a level of investment risk they believe they are comfortable with, without fully appreciating the long-term consequences.

“In the absence of good advice, they could remain comfortable until their money suddenly runs out – possibly at the point in their lives when they are most vulnerable,” says Matthew Yeates, Quantitative Investment Manager, 7IM.

The investment manager makes four recommendations to help the nation better understand the necessity of saving. Firstly, provide clearer savings targets and a quick way for savers to see what their current savings might generate when added to a state pension. Secondly, deliver better online and easily available tools for savers. Thirdly, make saving for retirement compulsory for workers, following in the footsteps of Australia, and finally, improve money education for all ages.

Verona Smith, head of Platform, 7IM, says: “There was opposition to compulsory saving initially but now Australians are among the best prepared for retirement of any workforce in the world. Here in the UK, auto enrolment, which people can opt out of, is the start of a journey that has to conclude with compulsion and with far more serious levels of contribution. The sooner we get there the better.”

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