For much of my professional life, I have taken comically outdated health and safety awareness tests. Each year, I answer that for a touch typist like me the top of the computer screen should be level with my eye line. When seated, thighs should be angled slightly downwards. These quizzes, I suspect, are instigated by insurance gnomes. Mostly I’ve gone along with them because I am a coward who fears that someone would eventually pester my boss if I failed to comply.
While I consequently know a thing or two about the right way to lift a box, my operational knowledge of my pension — which is far more fundamental to my long-term health and financial security — has until recently been lacking. But, since plucking it from the top of my dust-covered life admin to-do pile, I have spent considerable time learning about it. Like Andy Haldane, the Bank of England’s chief economist, I wish to admit to being baffled, despite the fact that I too am at least “moderately financially literate”.
In light of which, it seems worrying that any company would be more concerned about what an employee knows about optimal screen height than about the mechanics of saving for retirement.
Given how tricky pension transfers, tax breaks and long-term asset allocation are, compared with figuring out how to sit, it seems clear that our corporate quizmasters could do with revising their line of questioning. It would surely be better to check whether people can answer: “What contributions are you currently making to your pension?” Or, “What steps would you need to take to transfer to a different provider?” Or, “What’s the best way to go about making an additional contribution?”
It should be said, however, that UK companies are at a disadvantage when it comes to trying to educate people in this area. The retirement system has been tinkered with more than a gamer nerd’s PC set-up and the consequence is a maddening variety of schemes.
Here, employees are paid annually from retirement a percentage of their final salary. In an awesome win for humanity, many survive well beyond what was calculated in actuarial tables decades before. (This is less great for company balance sheets.)
Second, there are “defined contribution” plans, where employees can direct how their pension contributions are invested. They then cling desperately to the hope that they can one day live off the accumulated holdings despite investing during an era of historically low interest rates (hello).
But much like the personality traits of extroversion and introversion, when it comes to UK pensions, it’s a spectrum with all sorts between the extremes.
It is, at least, considerably clearer for those who started work too late to hop on the defined benefit party bus, as well as those who only recently started saving thanks to government-mandated automatic enrolment. They are typically in straightforward DC schemes.
There is, however, a growing group of people like me in such schemes for whom retirement is a vague ambition likely to be further undermined by future deficits, changes to the retirement age, additional unfavourable alterations to the state pension and low interest rates. We are in a different emotional and mental situation from fiftysomethings on DB schemes. And we need more information that’s relevant to us.
The government, for its part, acknowledges how important it is to have all of an individual’s pension data in one place, with some standardised information for users. It has secured the agreement of 11 providers who will create a “dashboard” akin to those used in countries such as Sweden and the Netherlands. This should have the added benefit of kick-starting some competition in the industry as people move to more accessible, comprehensible providers.
The group is aiming to have a prototype running by March, and the government hopes to make dashboards available to the wider public in 2019. Maybe they should come with a quiz. Just as long as they don’t ask about lifting boxes.
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