Meet the young voices shaking up OUR financial futures

Iona Bain

What if I told you that crazy-important decisions are being taken about your future finances by people who are…well, nothing like you?

Diversity is becoming such an oft-recited mantra, it’s easy to lose sight of what it actually means and why it matters. It’s not about political correctness gone mad innit (best said in a Cockney accent). Diversity shouldn’t be a condescending “make a wish” initiative for disadvantaged groups, only there to make your organisation or political party look woke (although sadly that is a risk in the wrong hands).

Diversity is about allowing people from different backgrounds to have a say. Research increasingly confirms that enacting this simple idea massively improves the performance of companies and quality of public policy debate. And excitingly, we are starting to expand our thinking on what makes companies and key stakeholder groups genuinely “diverse”.

While there is still vast amounts of work left to do in recruiting more women, people from BAME backgrounds and so on, the spotlight is also being shone on age. In other words…where the hell are all the young people?

This is a typical pensions trustee board meeting, full of hip young things…not

It’s a worthwhile question to ask in the pensions world, that’s for sure. That’s why I was encouraged to see such a thoughtful and illuminating feature from trade magazine Professional Pensions recently on three young pension trustees having their say in workplace pension schemes.

The move to get “next generation” voices on trustee boards will hopefully be the catalyst for more youthful representation across the financial industry. And this can’t come soon enough.
That’s because the pensions industry is failing to be relevant and accessible to a new generation of savers. It’s not updating its thinking enough and it’s not being prepared to reconsider the whole notion of pensions in our modern world.
The pensions industry is failing to be relevant and accessible to a new generation of savers

New ONS stats show more than a third of employees don’t know they’ve been automatically put into a workplace pension through auto-enrolment, and only a minority of schemes have any strategy for communicating effectively with young members, according to recent research from Share Action.

This leaves a ticking time-bomb of millennials sleepwalking into pensions they don’t know anything about. Even those who are engaged have no choice about where to invest, with no automatic option to consolidate or even keep track of their pension saving.

The average young employee today will have around a dozen jobs over their lifetime, with the risk that they’ll leave tiny pension pots languishing in default schemes under no competitive pressure.

Amid this worrying backdrop, the government is neglecting this generation’s pension interests, failing to implement the crucial safeguards we need and foster real financial empowerment.

Initiatives to help younger people, like pot follows member and the pensions dashboard, are being shelved by the Department for Work and Pensions amid fears of another technological flop ala Universal Credit. Caution is necessary for sound public policy – political cowardice, not so much.

It’s all a bit staggering when you consider how much this government also fears “OHHHHH JEREMY CORRRBBYYYNNNN.”

Without wanting to get too political, you would think the Conservatives’ number one priority would be the welfare and financial interests of millennials – the demographic it must court in order to win the next election and soothe the young Remainer faction. But noooo.

Governments of all stripes have traditionally got away with patchwork pensions policy because young people are not kicking up a stink. When young people are not heard in the pensions debate, this is what happens. Pensions policy stagnates, to our long-term detriment.

It doesn’t help that pensions policy is being largely captured by fashionable economic concepts (like nudge theory) and conventional wisdom rather than being informed by young needs.

To my mind, pensions policy is no longer to educate, help or assist my generation with making better financial choices.

Pensions policy is no longer about helping my generation to make better financial choices

The government currently has no strategy for mandatory financial education in the workplace, in spite of our highly complex financial needs. I know education is a bit of a groan word – how about “coaching” or just plain old “help”? (Since we use the word “advice” these days on pain of death…)

Many of us would be better off repaying expensive debt before pension saving, particularly at the lower end of the income spectrum. Some larger employees quite sensibly do advise this but it is a total workplace lottery as to whether you receive appropriate advice or not.

Successive coalition and Conservative governments have chosen to defend auto-enrolment at all costs instead of exploring the effectiveness of, you know, talking to young folks about their finances.

But what about the inadequate contribution rates and the constant spectre of people opting out of these schemes when rates do go up?

Indeed, cessation rates (i.e. the number of people contributing THEN opting out) is about double the admittedly low opt-out rate at present (about 14 and 23 per cent for medium and large workplaces).

I’d love to think these quitters have cast-iron plans for investing/saving elsewhere but it is highly risky to assume so in the absence of no real evidence.

Ultimately, the uncomfortable truth is that pensions policy has been co-opted by a narrow band of corporate lobbyists and poachers-turned-gamekeepers who are too (frankly) too old to know how it feels to be a struggling young saver. 
Many (if not most) have the best intentions and should be commended for their huge experience (& lifelong dedication) to the cause. But that doesn’t mean that they can’t be wrong, misguided, out-of-touch or simply too close to it all. That doesn’t mean they couldn’t desperately do with our input.

Politicians and pensions bods could desperately do with our input

I have already spoken about the knee-jerk and exclusionary recommendation made recently by the Treasury Select Committee to scrap the Lifetime Isa just 16 months after launch. The LISA, while not perfect, is a big step forward in offering choices about long-term saving rather than creating an unhealthy dependence on inadequate pensions, especially for the self-employed and women.

Yet the TSC only called a handful of seasoned industry figures, many of them with politically partisan backgrounds, to give evidence against the LISA. Where was the curiosity about those who actually have a LISA – or at least qualify for this? As much as the report made some solid recommendations elsewhere, such as the need to expand Help to Save, this oversight was unforgivable, in my books.

Especially if you contrast it with the much more thoughtful work being done recently by the House of Lords on post-school education which took evidence from 160 contributors.

But its’ not just about policymakers – the decisions being taken by trustees and fund managers, not to mention coverage by journalists and bloggers, deeply affect the financial prospects of millions of young people in this country.

It’s only right we have a say in this debate, where appropriate. I’m looking forward to sharing my own contribution to this area shortly but in the meantime, meet these fine folks shaking things up. Good work Professional Pensions.

What do you think? Leave a comment or tweet me – @ionayoungmoney.

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