Many of us start January with the best of intentions, setting ourselves resolutions to eat less, drink less, exercise more…perhaps even to write that best-selling novel!
But there’s an often-forgotten area and one which is particularly important this year as a result of the economic challenges brought on by the pandemic for both organisations and individuals. The area so many of us overlook is that of financial wellness.
At a personal level, financial planning for the short-, medium- and long-term is key to peace of mind, ensuring a sense of wellbeing which is hard to achieve when beset by money worries. Most of us will know the satisfaction and feeling of control when setting a monthly spending budget with the long term aim to reduce an overdraft or save for a new sofa.
For organisations, financial wellness is largely about planning and investing to achieve sustainability – ensuring that current and future overheads can be met without causing undue strain on income and, indeed, on the successful growth of the business.
What both have in common is that to achieve financial wellness – whether at a corporate or personal level - pensions are an increasingly crucial area to put careful thought (and action) into.
Being more proactive as a pre-pensioner
For individuals, pensions have been brought into particularly sharp relief by the shift in recent years in pensions support from government and companies. This means that the responsibility for preparing and saving for later in life now lies much more with the individual, requiring a higher level of proactivity and commitment to secure our future income.
Our pension can often feel somewhat of a remote concern – whether we’re 25 or 45 – and one which we may feel particularly loathe to put more resources into. Too often we might feel, say, that an extra £100 or £200 a month would be better enjoyed now rather than being invested for us to benefit from decades down the line. And let’s also acknowledge that the personal admin for pensions can be a bore – whether it’s carrying out extensive research on schemes which suit our needs, attempting to understand the complexities of what’s happening with a current scheme, or trying to track down ‘lost’ pension pots we paid into whilst in different jobs – and living at different addresses – years ago.
Perhaps one personal resolution for many of us could be to re-evaluate our monthly spending to see what we can afford to put aside for our futures with the motivation being that investment in a credible pension scheme will reap benefits at that point in our lives when many of us wish to be downing tools. Another resolution with a very real pay-off would be to locate and contact those previous pensions we’ve contributed to and all but forgotten about – a task that the Dashboard will help with in future.
Being more proactive corporately
With the increase of pensions responsibilities on individuals comes a related imperative for pension trustees to ensure they’re providing all the information people need to make informed decisions. This needs to be as accessible as possible – both in terms of being able to physically access those resources and ensuring the information is easily digestible so that someone unversed in the language of finance can understand exactly what’s happening with their pension, and what they can do to augment it.
Pensions trustees and chief finance officers also need to be proactive about securing their long-term pensions liabilities to protect members’ life savings. The increasing burden of legislative compliance notwithstanding, it’s critical to put time aside to consider future sustainability. Are your pensions fit for purpose looking ahead in 10-, 30- and 50 years’ time, able to bend and flex with a changing economic climate? Are you embracing digital, making use of technology in the way that people have now come to expect as a normal part of day-to-day life? And are you willing to lead the cultural shift in pensions towards supporting the future needs of society?
Future-proofing is a concept many of us are familiar with – actually putting this into practice to help people save for and protect their retirement should surely be a key 2021 resolution for anyone involved with pension schemes, whether from the perspective of an employer or a pensions administrator.
So whether it’s improving financial awareness from a personal perspective, supporting financial literacy at a corporate level, or securing future scheme sustainability as a pensions trustee, it’s an excellent time to kickstart – and achieve - those resolutions. Just in case the best-selling novel takes a little longer to come to fruition than you’d hoped.
