Not retiring: the pensions dilemma

Pensions are one of those things that many people really don’t think about too much when they are young because other things take priority – just the day to day can be hard, let alone thinking longer term. But as you get older they loom ever larger. The problem is that they seem to have become incredibly complicated.

Gone are the days when you just trusted everything to the state. Nowadays there are so many different providers and different types of scheme. Many don’t feel they have the right financial education to know even where to begin when it comes to knowing what is right for them and they feel financial advice is inaccessible and expensive. How many of us have gone to the bank to get advice on mortgages or whatever and felt we are being subjected to a soft sell on insurance plans and the like? It’s hard to trust organisations when it comes to money.

Many people also don’t have much idea about what pension they might have when/if they retire. They just fear it won’t be enough. They may have moved jobs several times and have multiple pension plans with different providers. But there is a free pension tracing service available as well as information on what the different pensions are, drawing down your pension early and so forth.

That is why better financial education at an early age and midlife MOTs where you can get pre-retirement financial plans are important, alongside support for accessible and impartial one to one financial advice.

The Government is currently going through a consultation process about whether it should introduce a lifetime provider model – the so-called Pot for Life. The consultation closes this week, but while some think they could give people greater control over their pensions and encourage them to top them up along the way [if they can afford to do so] the proposals are not without their critics. While the aim is to simplify the pensions market by allowing individuals to have one pension pot for life, some experts say that there are already ongoing government initiatives that should be given time to bed in before further reforms are considered. They believe that the proposal is a major distraction and would create substantial additional costs for members. Experts suggest that there are better ways to tackle the proliferation of small pension pots without disrupting the existing system. They emphasise the need to prioritise initiatives that increase automatic enrollment pension contributions and address the under-saving crisis.

For older people all this won’t make as much difference as it could for younger ones. Some are currently reaping the results of earlier problems and ethical issues – the Times, for instance, recently highlighted the plight of KPMG pensioners. It’s vital that young people are properly informed about pensions at an earlier age. It’s a hard sell, though, as old age seems far away, the present is increasingly difficult and much of the political thinking is focused very much on the short term as we lurch from crisis to crisis. That’s why extending auto-enrolment has to be a priority.

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