Who is Responsible for Your Retirement Income?

Trying to teach people about pensions and finances at school is expensive and does not work, says Money Advice Service trustee Laurie Edmans. Timing is everything

Emma Wall 15 May, 2014 | 7:30AM
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Emma Wall: Hello, I'm Emma Wall. Sadly most forecasters agree that the £100 state pension just isn’t enough to live on once you retire. It's imperative that you put money aside when you do come to claim your pension.

Recently at the Morningstar Investment Conference, I was joined by Laurie Edmans of the Money Advice Service to discuss whose responsibility it is, to make sure we’re all provided for in retirement.

So Laurie what do you think the biggest challenges facing investors at the moment are?

Laurie Edmans: Oh, gosh, making the right decisions as to how to use the money that they've got – or indeed in the sense of borrowing, the money that they haven’t got. Obviously investors are people who by definition do have money. So I guess its asset allocation is the perennial issue.

Wall: Of course, you’re with the Money Advice Service, you were with NEST for four years, which means you have a pretty good understanding of the pensions system. Auto-enrolment was designed to plug what was known as the ‘pensions gap’. Do you think it will fulfill that aim?

Edmans: I think it will fulfill it, if it manages to do one really key thing, which is to change the savings habits of the nation. What's needed if people are going to have a happy and fulfilled retirement, for which you need enough money, is that, we need a similar change in attitude to that which we have seen with regard to healthy eating. We need to move people away from stacking up with greasy fish and chips like I did when I was a boy, towards your five a day.

There is an attitude like that changing, I think one of the key things that NEST is doing, automatic enrolment is doing, is giving people some money hopefully that will be part of a big game change.

Wall: Of course you use that analogy there with the healthy eating, a huge part of that cultural movement was education. I mean on all food packaging, we were told ‘it's bad for you’. So how responsible do you think the powers that be are to educate people to make sure they are saving for the long term?

Edmans: That’s a really good question. It's a really difficult one to answer. Because my answer is going to be very unpopular in a lot of areas, which is that the evidence shows it's completely counterintuitive that trying to teach people to get engaged with their finances at school takes a huge amount of resource and doesn’t make a lot of difference.

So I think the most important thing that needs to be done is to get people at the point where they are interested in having to sort their money out; when they are about to get married, when they've sadly suffered a bereavement, when they are changing their job.

At the right life stage, that’s the point for engagement, rather than pushing out to the audience in a generic way to people 90% of the time, 90% of them aren’t interested. You've got to get them at the moment that counts and that’s the way I think it ought to be done.

Wall: Do you think there has to be combined effort of government, of employers or do you think it has to come from the person themselves?

Edmans: Ultimately it would be great if it was the person themselves. But there are two things; we people don’t like putting the money aside for the long run, they'd rather spend it than they would save it by and large. I can understand that, I’m a spender myself. If my daughters want to take somebody shopping, they take me, they don’t take their mum.

And I have borrowed more money than some small Middle European countries in my time. So you have got to get the balance right. So ideally it will come from the people but if we are going to have an attitude change people have got to understand what the right things to do are.

Wall: Laurie, thank you very much.

Edmans: Okay. Thank you.

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Emma Wall  is former Senior International Editor for Morningstar

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