RE: How I turned my tiny SIPP pension pot into millions.1 Nov 2022 09:51
Brits are not retirement ready
31/10/2022
by Hannah Gurga
Ten years on from the introduction of automatic enrolment, Director General of the ABI Hannah Gurga reflects on the significant impact that it’s had and the challenges that remain.
While we have reason to be proud of what has been achieved in the past ten years,
It is perhaps little surprise then that around 10 million people are saving too little. When auto-enrolment was introduced, it was intended to ensure people had at least half of an adequate pension income. The rest, it was hoped, would come from voluntary, personal savings. Those savings have not materialised.
It is therefore essential that action is taken now to secure people’s futures.
Within the next ten years, we want to see an increase in auto-enrolment pension contributions, with savers given the option to opt-up or opt-down from a new, but voluntary, higher rate.
Those who are underserved by the current system also need help. A secure retirement should not be the preserve of those who are wealthier and in secure jobs. Over the past twenty years, the proportion of self-employed people with a pension has halved, now sitting at just 16%.
Albert Einstein is said to have quipped that the most powerful force in the universe is compound interest. While this may not have been in all seriousness, it tells an important truth. The more you save, and the earlier you save it, the more you will have in the future. £100 saved with 5% interest at the age of 20 increases to £900 by the time you are 65. Start saving ten years later, and the growth of your £100 is reduced, reaching just £560.
This should perhaps not surprise us. More than half of those accessing their pensions are doing so without any professional advice. It is welcome news that the Financial Conduct Authority is now reviewing the boundary between financial advice and guidance. Financial advisers have a key role to play in helping consumers get the best out of their retirement. But, as most people do not receive advice, it is important to explore how firms can go further to help people throughout their lives, from getting started investing to accessing their pensions.
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