Dear Brits, please save more

Katie Martin (0:00)

If you're listening to this here podcast, then you're probably either a Finance Whiz or a Finance wannabe. At the very least, your market's curious. Welcome to the tribe. But in the UK at least, an alarming number of people have a seriously weak grip on their money, and in particular, a lot of people have no pension at all, just none. As a card carrying finance person, this makes my toes feel funny. It's a potential cliff edge for people, and you do have to wonder what it all means for the future of our economy.

So today on the show, scary stats, pension pots, and what to do about it.

This is Unhedged, the markets and finance podcast from the Financial Times. I'm Katie Martin, a markets columnist, locked in the basement of FT Towers. And today, unusually, I'm joined in the studio by not one, but two pensions pointy heads. My very lovely colleague, Claer Barrett. Claer, say hello.

Claer Barrett (0:58)

Hello, I'm not as pointy as you think.

Katie Martin (1:01)

You're pointy enough, but also Gavin Lewis from BlackRock.

Gavin Lewis (1:05)

Thank you for having me. How dare you call me pointy.

Katie Martin (1:08)

Look, it's a pointy head is a term of praise.

So, look, this podcast doesn't normally talk about personal finance, but it's a big financial issue for individuals, it's a big financial issue for the country. And in the UK, we have this thing now called auto enrolment. So you work for a company and unless you say otherwise, a little bit of money is taken out of your pay before tax and popped into a pension. Fine. So a lot of people think that nationally, pensions are just sort of sorted. I mean, Claer, on a scale of one to 10, how wrong is that idea of sortedness?

Claer Barrett (1:46)

Well, I mean, I would say five, because auto enrolment seriously is the best thing that has happened to pensions in the last 15 years. At least it's getting people starting to stave into a pension from the get-go. I mean, when I started my first job as a journalist, I would have had to have opted in to the workplace pension scheme. And for various reasons, including the fact that I didn't think I'd be there for more than two years, I just said no. And I worked out a while ago that had I said yes, and that money was invested in a S&P 500 tracker fund, it would probably be worth about £70,000 by now, which I could really have done with, because as a woman, my pensions chances are less than a man, statistically speaking, so women need a lot more help. Also, enrollment has shoved younger people into pension saving sooner. It's still missed out a lot of women who don't earn enough or work part-time or who are self-employed. That's a very big black spot in this country for pensions. But we all need to be doing more with what we've got, understanding it, trying to save a bit more. And for those who are earning more, it can be really valuable in terms of tax breaks. And I write a lot about that in my FT column.

Katie Martin (2:58)

Yeah. So Gavin, you and I met at like a wine and nibbles thing. And I was like, oh, a pension's pointy head.

You know, like a lot of people are just sort of staring into the abyss. Right. And I remember us having a chat about for a lot of people, how bad is this? And your answer was, yeah, no, it's pretty bad.

Gavin Lewis (3:18)

Look, that's right. So look, I mean, I think we have to separate to issue. So previously, before Alton Roman, we had a participation problem. Which basically said that there weren't enough people actually participating or contributing to a pension. And I think Alton Roman has been a great success. So I know that we- When did that come in? 2012

2012 So look, okay, I'm a pointy head. Fair enough. I wanted to correct to Claer, I want to say statistics. I didn't warn you.

Claer Barrett (3:45)

It was a test. It was a test.

Gavin Lewis (3:46)

I failed it. So look, and it's been a great success because before that, pre-Alton Roman, the statistics were something like four out of 10 people were participating in a private sector workplace pension. It's now nine out of 10

Katie Martin (3:59)

Right.

Gavin Lewis (4:00)

So that needs to be seen as a success.

The challenge now, I think, is slightly different. It's an adequacy problem, which is essentially what you will experience in, Claer. And I'm the same. I mean, I'm of Gen X, and you can take your jaw off the floor. I know. I believe I am. I know. I know. It's really hard to believe.