How inertia will solve our pensions saving crisis

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Person relaxing in a hammockIt may not feel like it thanks to the terrible British weather but summer is nearly over and October isn't too far away, and with it comes the advent of auto-enrolment.

I don't think it's too far to say that auto-enrolment is one of the biggest and most radical shake-up of the British pensions system that will happen in our lifetime.

October marks the start of auto-enrolment for people working in large companies. For those who have never bothered saving into their workplace pension it will herald a big change. If you are one of the non-savers you will be automatically put into the pension and money deducted from your salary each month.


People who work for smaller companies will find themselves auto-enrolled in to a pension at some point over the next four years.

Before you panic and scream 'I can't afford it!' - you can opt out of the scheme (although you will be opted in every three years).

The government is trying to make it awkward for you not to save for your retirement - it doesn't want you to opt out and is hoping the hassle of doing so will keep you saving. Never before has a project relied so much on the inertia of the general public.

For those who feel aggrieved by the government's plan, and for those who are jumping up and down saying they can't afford to save, I have only one thing to say: you can't afford not to save.


For younger people this message is particularly pertinent. Yes, pensions are boring and auto-enrolment will mean you have less money to spend in the pub or on holidays.

But those feelings of boredom - from both learning about pensions and not being able to go to the pub as much - are temporary.

What is more permanent is the lifestyle you will lead in retirement.

Figures from independent financial advisers AWD Chase de Vere paint a worrying picture.

A pension pot of almost £450,000 may seem considerable but it estimates that it would generate an income of less than £500 a month in real terms in 45 years time.

If you think that it's tough to go without that European mini-break or festival ticket, then just think how had you'd find it trying to eek out a life on £500 a month.

Pensions aren't glamorous or even exciting but nor is poverty, so do yourself a favour and when you're auto-enrolled stay opted in.

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