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The importance of engagement

20 October 2017

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How do you make long term savings relevant and what is to be done to encourage people to save more?

People know they need to save, but they lack guidance on how much to save. There is a higher level of people saving but the amount saved is at an all-time low. This could lead to many people disappointed in their retirement.

Speaking at the annual Pensions and Lifetime Savings Association conference in Manchester Guy Opperman, Work and Pensions Minister, said getting people to save more is crucial and "more is needed to be done" he "doesn't underestimate the problems but the fundamentals are positive"

And whilst auto-enrolment has had positive impact with "8.7 million people auto enrolled" it does not mean that people will be able to sit back and wait for retirement. "Auto enrolment is the first stage of engagement, basic payments will not get people a retirement" says Chris Curry, Director, Pensions Policy Insitute.

Speaking earlier at the conference Linda Gratton states that individuals would have to save 25% of their income from the day they start working to end up with a sustainable income from their pensions.

So how do we bridge the gap between too much and not enough? And perhaps more importantly, how does the industry ensure individuals engage with their own savings?

Ruston Smith, Chair, Tesco Pension Trustees, emphasises the importance of making communications simple.

"Simplify the jargon, we currently work in a regional sense when trying to make things simple" Individuals are reading a different set of words from different employers, and when people move jobs and location this can get very complicated. "The dashboard can be a centralised place to make things simple." Ruston says that the average person in an average 12-hour day consumes the equivalent of 35gb of information.

Richard Butcher, Chair PLSA, suggests that setting targets will help those that are disengaged to better understand what they are required to save.

These targets are laid out in the consultation paper – Hitting the Target.

The papers central proposal is that the UK should develop a set of 'national retirement income targets' The identification of a target annual income to achieve a desired standard of living would help savers by giving them a clear and understandable goal. On the basis of this goal, savers would then be able to calculate the amount of savings necessary to deliver the target income.

The paper states that there are three categories of saving; £10,000 to less than £15,000 is adequate to provide an individual with a 'minimum' standard of living in retirement; £20,000 to less than £25,000 is adequate to provide an individual with a 'modest' standard of living in retirement; and £35,000 or more is adequate to provide an individual with a 'comfortable' standard of living in retirement

Richard states that the minimum target of £10,000 a year needs to be realised by everyone. He invites responses to the detailed questions set out in the report by 12 January 2018 "and we'll be touring the country over the next six months, listening to anyone with an interest in helping people hit the target"