The Department of Work and Pensions announcement that more than one in every four British children will reach their 100^th birthday will be regarded by most as a cause to celebrate improvements in the health and safety of the nation. But in the world of pensions, increasing longevity is regarded as yet another challenge for the UK’s often inadequate retirement savings system.

Life expectancy rates are rising, but the number of people in workplace pensions has been in gradual decline for many years, leading to an increasing burden on the government as the burgeoning pensioner population relies on state benefits.

Pensions have never been an issue which has invigorated young people, but even for those that do sign up, most will be faced with defined contribution (DC) provision that forces them to take responsibility for their own risk and return. As generous and essentially risk-free defined benefit (DB) pensions are closed to all but local government and a handful of large corporates, DC is the future whether we like it or not; especially with auto-enrolment due to close the net in 2012.

The National Employment Savings Trust (NEST) has refocused the industry on improving DC provision for those workers who do not fall into NEST’s target demographic of lower earners and short-term workers. Companies across the country are reassessing their pension coverage and taking advice on how to improve DC schemes so they can start using them as a way to attract and retain staff, much like ‘gold plated’ DB provision once was.

This means explaining member’s options simply, guiding through the various investment options available and making clear the implications of different levels of risk. Pensions workshops and interactive online portals are one way to engage staff, while options like share-save schemes and workplace ISAs are also helpful for attracting people at either end of the company hierarchy.

I started reporting on pensions a year ago, with only a basic knowledge of the industry and no burning desire to join a pension scheme. But very quickly I realised that it is by far the easiest, safest and crucially, most profitable way to save. With interest in even the most generous savings accounts and ISAs barely breaking 3% these days, the prospect of your salary contribution of anything from 4 to 10% being matched by the company is surely worth a bit of time and effort.

Most DMGT employees are lucky enough to be privy to a scheme awarded the National Association of Pension Funds’ Pension Quality Mark, which recognises DC schemes that are well run, clearly communicated and with good contribution rates; employers matching contributions of up to 10%.

It may seem like a drain on your finances for something decades away, but chances are you may well live to be a centenarian, and wouldn’t it be nicer to spend your twilight years in luxury?

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Comments:

Aziza Azul says:

September 12th, 2011 at 16:32

Very interesting article. The idea of pensions is definitely something that should not be ignored. It is disregarded too easily due to people thinking it's too far ahead for them to worry about. In this day in age, it pays (pardon the pun!) to be prepared.

Paul McShane says:

November 22nd, 2011 at 12:19

I only started mine at 30 but am glad I at least have it in place. A bonus is the policy can be moved to a new employer so I don't lose contributions and who really thinks the state pension will support them? For every year you leave it, that's a year's retirement income you've lost. It pays to start!

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