Life hacks needed for retirement planning
“Life hack” has entered the modern vocabulary as the term for a simple trick, shortcut or novelty method for making daily tasks easier. The best are usually simple, require no specific skill or resource to operate and offer immediate benefits to the user. Whether a hack relates to storing clothes, keeping food fresh or booking preferred seats on a plane, they demonstrate the benefits of applied expertise and knowing something you didn’t previously.
Figures published recently by the Money and Pensions Service (MAPS) show that effective life hacks are badly needed in the area of financial planning.
MAPS estimates that 22 million people don’t know enough to plan for their retirement, with disengagement, low awareness and mistrust of financial companies among the reasons given for deferring or doing nothing. For generations who are likely to live longer than their parents and grandparents this creates significant financial risks. So how should we go about ensuring people access the help they need to achieve a secure and enjoyable retirement?
A potential lifeline?
While it may not be the most novel of life hacks, the government’s free and impartial pensions guidance service – Pension Wise – is clearly making a difference for a small but growing minority of savers. The service was launched in 2015 to provide impartial, professional guidance to savers aged 50+ in an area that is known to be complex and unfamiliar.
Official analysis found that 97 per cent of Pension Wise users said their understanding of their pension options improved after their appointment, with 95 per cent saying they had either recommended the service to others or would be likely to do so. Similar numbers (92 per cent) also said they feel confident in their ability to avoid pension scams having used the service – particularly important given the significant increase in scam activity targeted at pension savers since the pension freedoms were introduced in 2015.
Pensioner homeowners missing out
The need for people to receive impartial, professional support is also borne out by the number of pensioner homeowners failing to claim valuable benefit entitlements.
Just Group’s own State Benefits Survey found that of pensioner homeowners entitled to receive benefits, 49 per cent fail to claim anything and miss out on an average of £1,139 a year.
A further 20 per cent of those who are claiming receive too little and miss out on an average £855 a year. Of the three key benefits tracked in the research, Guarantee Pension Credit has the biggest unclaimed average amount at £1,889 a year. In one case we identified a loss of £4,173 a year.
These are meaningful sums of money that would make a real difference to people’s lives, especially for those struggling to pay everyday living costs. Yet the impact of people “not knowing what we don’t know” can be great and have a real negative impact on financial security in retirement.
Finding a way forward
While not quite a life hack, policy initiatives are underway to address stubbornly low levels of Pension Wise guidance usage. Official estimates put usage levels at around 10 to 20 per cent, which is clearly not enough to deliver the step change required to improve people’s later lives. The creation of MAPS and forthcoming trials of a new “default guidance” policy, modelled on the successful auto-enrolment policy, should make a real difference here if properly implemented.
Only by taking these active steps to show people what they might not know now, will we manage to improve people’s financial preparedness for retirement.
Delivering a new social norm of impartial guidance usage isn’t a panacea, but evidence suggests it will offer savers a much better chance of avoiding the worst and enjoying the best in later life.
Stephen Lowe is Group Communications Director at Just Group.
Have you been affected by any of these issues?
If you have been affected by any of the issues described in this blog, or simply need someone to reach out to, you can call Independent Age’s freephone Helpline for information and advice on 0800 319 6789.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the policy or position of Independent Age