Belt & Braces Approach To Your Pension
12th September 2017 Justin Urquhart Stewart, Co-Founder 7IM
Pensions Awareness Day on 15 September is all about galvanising the industry and press to tell people about how important pensions are.
I've made a career out of looking to help people with their pensions and that’s included talking about them and how financial markets affect your approach for the last 30 years (and counting…). I am deeply conscious though that I haven’t updated my attire in all that time. While the '1980's City Look' – red braces and all – is probably no longer deemed fashionable per se, I gather ‘retro’ is all the rage.
One thing I have, however, keep bang up to date with is the constantly changing financial markets, what laws politicians are passing that affect pensions and what that means for you.
I talk about it to our clients constantly, appear on the news, get articles published such as this one here on Family Business United, and I visit schools and universities.
But we can always reach more people and make more information accessible – so we now have a Pensions Awareness Day on 15 September. It’s all about galvanising the industry and press to tell people about how important pensions are. Unfortunately it’s at the same time that we are being distracted by life in general…
So here I am again griping about how you need to get to grips with your pension. It’s obviously preferable that you start saving when you start your career, but saving for 40+ years hence when you’re barely able to think beyond the next weekend.
So do you understand subjects like pound cost averaging and fully appreciate the benefits of dividend compounding? Would you laugh incredulously if I talk seriously about 'herd like' behaviour? Quite! And if you unfortunately don’t have a solid grasp on these, how do you know whether you’re saving enough for your later years.
Earlier in the year, 7IM, the company I co-founded, kick started a 'we need to talk about' campaign. We questioned some of the old assumptions about the financial planning for your retirement.
We realise that it’s not just my fashion sense that’s stuck in the 80s, but that much of our financial planning practices are too. Hopefully however, people are starting to take a long, hard look at what’s happening.
It's thought that around £100bn is invested in funds which look to move money from the riskier assets (stocks and shares) to investments that are seen as safer havens i.e. bonds and Gilts at pre-determined ages. And while I’m hopeful that someone explained the risks attached to these when the person signed up to their pension originally and it still might be the right time for some, it is absolutely not necessarily right for everyone. The world has changed, people are living longer, we have far more options in which to invest our pension savings than ever before and our money has to work so much harder…
So I believe that there’s a bit of an education job to be done and one which needs to go way beyond this website, your workplace and around the coffee table. The government should be devoting some real time to this issue. It’s quite daunting that lots of adults may end up enduring an old age where their money has run out. MPs may not have to face this given their final salary schemes.
So please let’s start talking about the grubby stuff and stop procrastinating about pensions. You should NOT be ashamed about any lack of knowledge – after all no one’s ever taught you about it. I’d love it if people were in a much greater position of knowledge about what's happening ahead of their retirement. We spend more time as a nation planning our annual 10 days in the sun than we do planning for the 20+ years we’ll spend in retirement.
I've always believed in action, not words. Now I think it’s time for both to ensure we all have a decent pension.
Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.
Visit their website here to find out more