It’s a question many employers ask themselves. Findings from initial research by Buck Consultants, through its think tank Financial Frontiers, turned up 5 attitudes and beliefs at the root of the problem.
Here are the highlights:
I may die tomorrow
Contrary to all health statistics, people are caught up in a morbid grip of fatalism. Statistically, we know that the average citizen is due to live to 80. Cambridge University geneticist and researcher, Dr Aubrey de Grey claims that the first person to live to 1000 has already been born. Yet, feedback from Financial Frontiers research shows a belief system that discourages retirement savings.
Work ‘till I die
A second stream of thought is that people will be able to work until they die. The reality is that this is just not going to be possible. Many will need to sell their homes to meet the bare minimum of care in their old age. Entire professions will not be able to maintain their livelihood due to the preciseness of their skills, the need for manual labour, or due to the sensitivity of the task.
Someone will look after me
There is a strong paternalistic streak in people’s worldview. The blue-collar workforce still believes in a job for life. Young, well educated and highly paid employees believe that the government will look after them financially. The belief was almost religious. The overall message was “something will happen and it will all work out”.
Can’t save, won’t save
After evaluating the research, there was a growing question: is lack of savings due to the high cost of living or other priorities? A 45-year-old research participant said, “I say bugger it, live for today”. The focus appears to be on enjoying the moment rather than worrying about the future. Holidays, a car, electronics and clothes were seen to be more important than retirement savings.
Can’t do the math
Overall, people who had taken a look at their finances decided that saving for retirement fell in the “too hard bucket”. They don’t save in percentages, but rather put away small amounts of money whenever they can. They do not understand compounding, either on their salary or on the interest on capital. They find it difficult to compute what needs to go into the pot and what is likely to come out.
People invest their money in things they believe they understand. Mortgages and property together topped the list of savings vehicles. Current and savings accounts came next. New tax-free savings accounts have gained traction with savers as investment vehicles. Finally, even credit cards showed up on the list of savings vehicles, but not a word on pensions.
Buck’s research suggests key barriers to retirement savings are behavioural. The research has explored how people in the study have made positive financial decisions outside of the workspace and these have a direct impact on how employers can encourage retirement savings. There is a growing belief that employers are at the start of employees’ journey in making sensible decisions around their finances and retirement savings behaviour.
For a full review of the research, download “How to overcome employee apathy over retirement savings”.
If you’re not saving for your retirement, what’s your reason?
Tuesday 21 June 2011
Monday 14 March 2011
The Intelligent Pensions Push
Published in Pensions Week, 14th March 2011
A Google search for ‘Pension’ gives 74.3 million results in 0,2 seconds. Type in ‘Pensions Week’ and even before I press Enter, I am asked whether I want the magazine, the awards or whether my query is related to David Rowley or James Redgrave. It is amazing how Google searches tens of billions of pages to pinpoint the specific page we are searching for.
Now enter stage left onto the floor of the average pensions company in the United Kingdom and you may be forgiven if you were to believe that you had stepped into a Kafka novel, with a well defined bureaucracy, cupboards full of paper, boxes overflowing with micro fiche and earnest looking employees tapping away on calculators.
You may wonder whether the internet has passed these people by. But no, they are on LinkedIn, Facebook, tweeting, texting and watching football via streaming video. So why is there this chasm between their private and corporate technology capabilities?
For example, imagine an employee or HR representative scanning a marriage certificate on a multifunctional device quite common in most offices. Intelligent software already has the capability to recognise the type of document and recommend a variety of next steps.
Does the document need to be forwarded to HR, the reward department and the pension team? Would the employee like to update their ‘Expression of Wish’ form or add their spouse to their private medical arrangement? Perhaps getting married may change their attitude to risk, so should we therefore remind them of their DC fund choice? Or in this new Corporate Wrap world, enquire about their interest in a mortgage at a special company rate? Does the DB pension system need to update the requirement for a spouse’s pension, which automatically updates the Actuarial valuation? Of course, the Trustees should be able to log into their Trustee dashboard and track all of this in real time.
The catch is that in the global world we live Marriage Certificates come in all shapes, sizes and languages. The beauty of technology is that today it can recognise most languages and translate it into appropriately. Optical Character Recognition makes the size and shape of the paper irrelevant.
We have seen this happening in the world of personal finance where we are able to log into a single portal to track our savings account, credit card balance, ISA’s, mortgage repayment and stock market investments. The market is increasingly requesting this ease of access in the workplace.
Pensions companies are spending large amounts of money and time on developing that perfect mix of product and service backed by seamless technology for the workplace. The winning answer will be defined not by a self serving strategy to sell financial products, but looking at ways to truly add value to Trustees, HR and employees.
For further information on the future of technology in pensions email girishmenezes @ hotmail.com
A Google search for ‘Pension’ gives 74.3 million results in 0,2 seconds. Type in ‘Pensions Week’ and even before I press Enter, I am asked whether I want the magazine, the awards or whether my query is related to David Rowley or James Redgrave. It is amazing how Google searches tens of billions of pages to pinpoint the specific page we are searching for.
Now enter stage left onto the floor of the average pensions company in the United Kingdom and you may be forgiven if you were to believe that you had stepped into a Kafka novel, with a well defined bureaucracy, cupboards full of paper, boxes overflowing with micro fiche and earnest looking employees tapping away on calculators.
You may wonder whether the internet has passed these people by. But no, they are on LinkedIn, Facebook, tweeting, texting and watching football via streaming video. So why is there this chasm between their private and corporate technology capabilities?
For example, imagine an employee or HR representative scanning a marriage certificate on a multifunctional device quite common in most offices. Intelligent software already has the capability to recognise the type of document and recommend a variety of next steps.
Does the document need to be forwarded to HR, the reward department and the pension team? Would the employee like to update their ‘Expression of Wish’ form or add their spouse to their private medical arrangement? Perhaps getting married may change their attitude to risk, so should we therefore remind them of their DC fund choice? Or in this new Corporate Wrap world, enquire about their interest in a mortgage at a special company rate? Does the DB pension system need to update the requirement for a spouse’s pension, which automatically updates the Actuarial valuation? Of course, the Trustees should be able to log into their Trustee dashboard and track all of this in real time.
The catch is that in the global world we live Marriage Certificates come in all shapes, sizes and languages. The beauty of technology is that today it can recognise most languages and translate it into appropriately. Optical Character Recognition makes the size and shape of the paper irrelevant.
We have seen this happening in the world of personal finance where we are able to log into a single portal to track our savings account, credit card balance, ISA’s, mortgage repayment and stock market investments. The market is increasingly requesting this ease of access in the workplace.
Pensions companies are spending large amounts of money and time on developing that perfect mix of product and service backed by seamless technology for the workplace. The winning answer will be defined not by a self serving strategy to sell financial products, but looking at ways to truly add value to Trustees, HR and employees.
For further information on the future of technology in pensions email girishmenezes @ hotmail.com
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