I came across a really good article yesterday on the Investors Chronicle website that I thought readers of this blog might like.
It refers to the point that I make quite often, and that is pensions are boring and unattractive to younger people.
Tell someone in their 20’s to invest in a plan that they can’t access for the next 30 years even if they want to because they are going to wish they had when they get older really is not the way to make them bite off your hand. Young people live for today possibly more than any other generation we have known. The main problem is that young people today are also going to live longer than any other generation we have known too.
Younger people also want to start work later and retire earlier. Living off your parents for the first 21 years of your life and then hoping to work for, say 35 years from 21 to 56, and then being retired for 40 years after that means you better have a pretty productive working life.
As well as being incredibly productive during those working years where you will need to save for and then pay off your home, perhaps fund a family, definitely fund your lifestyle and save enough to let you live off the income for the rest of your life, you are going to need some help.
The Government has created two investments over the past 25 years that people really understand – one is the Pension and the other the ISA.
In broad terms people understand what a Pension does and they understand what an ISA does. Both of these plans offer fairly generous tax incentives to encourage you to put your money into them. Generally they can be used side-by-side very effectively as a retirement planning strategy.
However, put them together and you could have the best of both worlds. For me, that is what the public is crying out for. An investment that offers tax incentives for investing, but access to your money any time you need seems ideal.
Of course, there is the argument that pensions protect people from themselves. Offering access to your pension assets where people might just take advantage, and then have no money left when they retire is an obvious problem.
However if we are to encourage people to save and invest so they can stop working sooner rather than later, and to help them create that wealth they will need in the absence of old style company pensions, or state pensions at a reasonable age, then we have to think differently.