Our financial future: The growing need for a Living Pension

Alice Tapper is the author and creator of Go Fund Yourself, a money expert on BBC Morning Live and columnist for Glamour magazine. In 2020 she launched the successful #regulateBuyNowPayLater campaign which led to the FCA’s decision to bring BNPL products under their remit. Alice spoke to us about pension provision in the UK, why she joined the Living Pensions Steering Group and how she wants to see employers stepping up to the challenge of providing a pension that will meet people’s everyday needs.  

Tell us about Go Fund Yourself and the polling you recently did

Go Fund Yourself (GFY) is a financial news and education platform for 20-35 year olds that I started on Instagram. It now has over 66,000 followers and is an online community of people who want to feel better about their financial and working lives. I have been supporting the Living Wage Foundation in their work developing a Living Pension standard, so we did some polling to get a sense of how younger people feel about their retirement savings. It was viewed by around 20,000 followers and we received 3,500 responses, so it is clear that this is an area of interest and concern to many.

Your polling showed that only 15% people felt they knew what they need for retirement and 78% did not feel positive when thinking about retirement financially. Pensions can be hard to understand, do you agree? 

In short, yes. There is definitely an understanding gap. People often don’t know what they should be contributing, or even how pensions work, which leaves them underprepared for their retirement. It's interesting that this also closely ties with how people feel about pensions. There is a lot of confusion and fear; fear of anything linked to the ageing process and fear of missing out on something important. 

So where do we go with this? 

This is a problem but also an opportunity. Firstly, acknowledging that employers themselves are often not pension experts, I’d like to see pension providers be more creative with resources and the way pensions are communicated. In the polling I conducted 49% said they wanted more information; 1 in 10 commented on the importance of knowing how much was in their pension and how to project for the future.  

Secondly there is an opportunity to reshape the feelings people have about pensions and grasping what life might look like 20, 30 or 40 years into the future. I think we should reframe it into a positive conversation where possible. Ask what kind of life do you want to look forward to in later life, and then outline clear steps on how to get there, which is how I’ve discussed pensions in my Hot Girl Retirement article. 
How do you think the current pensions landscape specifically affects those on lower-incomes?   

There is often privilege in having a financial education or financial literacy, but most important is the privilege that comes with having the security and time to think ahead to the future. For those on low incomes, who may be struggling to put food on the table, their focus will be the immediate future – on the next week or pay-day, rather than their future in say 30 years. We’ve seen this through the pandemic and again now with the cost of living crisis, with many on low-incomes opting out of pension contributions to focus on meeting their everyday needs. There’s not necessarily an easy answer to this, but this is where the importance of having an employer who will take on some of that pressure by contributing a reasonable amount comes in – there’s then more incentive for employees to contribute but if they can’t, to be safe in the knowledge their employer is contributing something decent.
What about auto-enrolment into pension schemes – do you think this has been helpful? Are there any shortfalls?  

I’m a behavioural economist by academic background so the whole auto enrolment thinking was based on nudge theory - if people don’t have to think about it then it’s a good thing. I think overall this has been successful and does make sense so that people have a pension by default, but this does leave some people out, such as the self-employed. 

On the other hand, auto-enrolment has meant less need to engage on pensions for both employers and employees. For employers it could become a tick box activity with less incentive to explain to employees what it all means. I remember in my first job, I had a generous pension scheme but there was nothing given to me that explained how to make the most of this pension and the fact they’d match personal contributions. So my only concern is to ensure auto-enrolment doesn’t lead to less communication of pension schemes with employees.  

What do you think about the idea of a Living Pension? Why is this especially important for those on low-incomes?  

Over two million pensioners are in poverty, with increasing numbers of pensioners in rented accommodation and the rising cost of care as people live longer and the social care system is squeezed. 

Many are not adequately prepared for their financial futures and retirement. This disproportionately impacts women with the pensions gap and those on lower incomes who simply aren’t able to save enough into their pensions, and perhaps work for employers who invest less in pension schemes.   

So there is clearly a case for an initiative that seeks to change that. I hope most people are aware that the state pension is simply not enough to live on. My Hot Girl Retirement article shows that even for a pretty basic standard of living, the state pension doesn’t cut it. So that’s where the Living Pension standard comes in, as a natural extension of the Living Wage, the initiative seeks to make sure people are prepared for their financial futures and can have a reasonable standard of living and to not have to constantly worry about the basics.
What do you think is the role of employers regarding pensions that adequately set someone up for later life?  

I do believe that it is the employers' responsibility to ensure a reasonable standard of living for their employees both now and in the future. There are over 10,000 employers securing that standard now by paying the real Living Wage and it's great to see that the Living Pension pilot will take this conversation with employers further and encourage them to apply the same responsibility to pension contributions. 

I hope through the Living Pension work that employees can have a good and fair pension and hopefully place equal importance on equipping people with the information they need to make the most of a Living Pension contribution standard.