Employers have an important role to play in demystifying the world of investment and savings, writes Liz Field – chief executive of the Wealth Management Association
The UK’s financial landscape has seen a number of important changes in recent years. The government has placed an increased focus on pensions and long-term savings as it seeks to address the challenges presented by an aging population.
Creating a culture of investment and savings is a key priority for the Wealth Management Association, so we have been pleased with the increased efforts displayed by the government so far.
The pensions auto-enrolment scheme is soon to enter its third year, and has largely been greeted as a success. The scheme has been described as the biggest change to pensions in a century, and it’s easy to see why.
The Pensions Advisor anticipates that 5.2 million workers will have been enrolled by the end of the year – many of whom will never have been involved in a pensions scheme before. This represents the first taste of significant long-term saving for a substantial portion of the population.
However, while this can only be a good thing, the truth is that just 56 per cent of British people are estimated to have enough savings set aside to see them through retirement. Basic pensions alone are rarely enough, and people must now take charge of their money and seek out new ways to invest and grow it themselves.
We need to change the perception among workers that pensions are something that is done for them, and establish the need to actively engage with and manage them. The recent changes in pensions freedom – another big shake up of the system – will certainly help in this regard, enabling people to access their pots earlier and re-invest it for better returns.
Regardless, we have found that the majority of people are likely to go for default saving options and avoid getting more involved if they can help it. Investment can often be seen as a confusing activity reserved more for rich city businessmen and out of reach for ordinary people.
While serious investment is undoubtedly complicated, it is accessible to a far greater portion of the population than most realise.
The digital era has helped change this perception, and we have seen an increasing number of people begin to get involved in the investment world through the online solutions more of our members are providing.
However, the surfeit of information and options available online can actually can only do so much, we need to see greater education and engagement at all levels to make a real change in culture. With so many options, a human touch is needed for people to find a starting point.
Demystifying the world of finance, investment and savings should start before people even leave school, but employers can also make a huge difference once people enter the world of work.
With pensions soon to become a universal offering, there is an ideal opportunity for businesses to engage with their employees and encourage them to fully understand the options ahead of them.
Establishing a strong culture of long-term savings for the un-invested generation will not only help to ensure our nation’s aging population is sustainable years down the line, but will also create new finance for our businesses as more people seek to invest their finances actively.
Liz Field is chief executive of the Wealth Management Association. She was previously CEO of the skills trade association, Financial and Legal Skills Partnership. Her experience includes 15 years as a CEO running skills trade associations in the financial services sector including insurance, banking and investment management, senior positions in Gerrard and MD of her own company. Liz holds a degree in psychology and a master’s in occupational psychology from Birkbeck.