Pensions: will a furry monster help you to save?

The newest member of the Department for Work and Pensions staff isn't your usual civil servant; he's a giant furry monster called 'Workie' the workplace pension.

In an effort to engage workers with their workplace pensions the government has followed on from auto-enrolment with a new £8 million advertising campaign. The aim is to turn pensions from something scary into something a bit more cuddly and accessible - and technicoloured furry beasts have been deemed a good way to do it.

Engagement is definitely what's needed if auto-enrolment is be a success; experts have already said the contribution levels set out under the scheme (which will rise to 8% by 2017) aren't enough to secure a decent retirement income and are only a start. People need to engage and save more.

However, I'm not sure if a furry friend can help. Sure, Alexander the meerkat has made insurance cuddly and done wonders for Comparethemarket.com, but insurance is easy, pensions aren't.

If we are to have any success with pension saving, and especially in getting younger generations (with housing deposits to save for and student loans to pay off) to save then we need to make pensions easier.

I'm pretty sure that the average worker is unaware of what they lose if they opt out of auto-enrolment - giving up an employer contribution and government tax relief. By doing this they are snubbing free money (albeit money they can't touch until they're older).

Simple savings

As the DWP rolls out 'Workie', we are hearing rumours of impending changes to tax relief – with higher rates for the axe. There is speculation that it will be replaced by a flat rate of 33%, meaning higher earners will miss out but basic rate taxpayers will gain.

However, any change in the tax relief won't matter if you can't get people to understand what they are giving up and instead of bringing in cuddly advertising campaigns I think the government should be taking its cue from the supermarkets and advertising what a good deal it's offering.

If the 33% tax relief rate is introduced pensions will become a 'buy two get one free' offer – you pay in £2 to your pension and the government will give you another £1.

Yes, Workie is cute but that sort of message is the sort of thing we need in order to get people saving – they know they have to participate to get the deal and they can see the deal is a good one. Pensions don't need to be cuddly, they need to be simple.