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It’s good to talk about money

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 03 June 2009  |  Comments 4 comments

Young people and pensions – it’s not going well is it?

Young people and pensions – it’s not going well is it? Barely a week goes by without another story on the pensions gap. It has reached the stage where it is simply a given that youngsters are clueless on how pensions work, and what they need to be paying in to get a decent living in retirement.

I know I didn't. I only sorted out my pension earlier this year at the age of 25. I know I should have got my act together quicker, but like many, I simply put it off.

Now a new survey by YouGov has found that of all the money subjects young adults would ask their friends about, pensions comes bottom with 12%, compared to buying a house (27%) and how to shop for the best deals online (27%).

In all honesty, I'm amazed it's as high as 12%. I've never had a chat about pensions over a pint in my local. Have you?

But breaking down these barriers is exactly what's needed. Part of the reason more young people have not signed up to pensions - and I speak from experience - is that they do not know where to go for answers to some of the simplest questions.

And, just as important, they may feel embarrassed asking - I know I did.

Obviously it helps that from 2012 there will be a duty for employers to enrol their staff onto a decent workplace pension scheme, but we need to get young people engaged with pensions - and money management generally - sharpish.

So how do we do that? Personally, I'm a fan of introducing some basic money lessons into the national curriculum. Much as I enjoyed school, an awful lot of the things I learnt so devotedly have not so much gone to the back of my mind as disappeared out the sides. I don't think that would have been the case if I had learnt about how to manage my cash.

But what do you think? Is education the way to go? Or are pensions fundamentally flawed? Let me know in the comment box below!

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Comments (4)

  • LAWR3NC3
    Love rating 9
    LAWR3NC3 said

    Well done John. Placing 'meaningful' subjects such as Personal Finance just about at the top of every school curriculum is something that I have believed in for aeons. What on earth is the benefit of learning about the 100 years war when you do not know how/why to buy/rent a property, how tax is levied, why you should save money?

    I would add the following subjects as absolutely vital:

    How a home works ie basic plumbing, building maintenance, basic cooking (particularly for boys!), health education (not just sex education!!!) personal nutrition, how we acquire & use electrizity ....

    This is not an exhaustive list but I challenge anyone convince me that a young adult does not need this sort of crucial 'knowledge of living' information more than history or geography - to name but 2 subjects that surely should be specialist not general.

    HStG

    Report on 04 June 2009  |  Love thisLove  0 loves
  • matchmade
    Love rating 33
    matchmade said

    Thanks for your article, John, but I'm afraid you are simply going along with the belief that personal pensions are a good thing and young people need to be "encouraged" to invest in them. Personal pensions are fundamentally flawed as a concept because they place too much responsibility on the general public, who are not experienced or particularly interested in acquiring investment knowledge: at least 50% barely have any cash savings, never mind an ISA or a pension! Personal pensions also place too much risk on the individual, who cannot be expected to know which investment fund is good or bad, or which charges are high or low and with what justification, and then track all this over time. We've just had a "lost decade" on the stock market, where the market is no higher now than it was in 1999, so anyone like me who has had a personal pension has seen their fund go nowhere - how do we know this won't continue? It's simply too complicated and too risky to place all the burden of such an important issue (one's basic retirement income) onto the individual to manage - he or she is just too likely to get squashed by vastly greater market forces.

    There is too much time and effort wasted on trying to persuade people to go for personal pensions, in the misguided belief that 100% of the population want "choice" which also means "heavy responsibility" for which most people are ill-suited when they have so many other areas in which they need first to acquire and maintain skills - looking after where they live, keeping a job, bringing up children and so on.

    Personal pensions are fine for the small proportion of the population who have the time and money to invest in such things, and SIPPs seem an ideal vehicle for this, or ISAs for those who don't want to tie up all their money until 55. However all the other forms of pension are largely a waste of time, and should just be a conveninet mechanism for employers or individuals who wish to use them, but not be promoted with all the hand-wringing and potential compulsion that is being considered.

    What should be done instead is to greatly increase the basic state pension for everyone, and tie it to the growth in average earnings. People would then have a better basic standard of living in their old age, paid for out of general taxation as now, and subject itself to tax like any other income. This should be a universal right, like child benefit, and *not* means-tested or topped-up. If wealthy people get the state pension, that's fine with me - they've earned it like everyone else, and in fact have paid disproportionately for it through higher taxation on their pre-retirement earnings.

    How would this be paid for? Easy - kill off the rights of all public sector workers to final salary pensions, which are unfunded and an absolute millstone round this country's neck. It is a disgrace that the final salary pension is, rightly, dying off in the private sector, yet continues unchecked in the public sector. It divides the country into haves and have-nots, and creates a client state of people living off the wider taxpayer. If public sector workers want a top-up pension, they should invest in it the same way as most other people, and at least they can rest secure that they may have lost their final-salary rights, but the general state pension is greatly enhanced.

    Report on 04 June 2009  |  Love thisLove  0 loves

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