We all know pensions are important, they’re the things that pay us a wage in retirement when we stop working.
But we know precious little about how they work and though we see large amounts of our salaries disappearing into them , we have little confidence about where the money is going, whether we’re getting value for our money or how we’re going to get our pension paid back to us.
There’s just so much to think about- investment, tax, timing and not least – the vexed question of how long we’re gong to need this “age wage”.
If we knew what we were doing and had answers to some of these questions, pensions could become things to look forward to , not just that pile of papers that lurks in the bottom drawer.
We need people we can trust!
The pensions we save into are looked after by people we can trust – they’re not called trustees for nothing. Sometimes the people charged with looking after our interests go under different names – like independent governance committees but it comes down to the same thing – the people we can and should trust – are looking after our pensions and generally doing a good job of it.
The trouble is that this message is not getting through to us – the general public. The pension experts are over there making statements about value for money that aren’t very relevant to people with busy lives. Ordinary people want people they can trust who talk to them in a simple and easy way.
That’s where AgeWage comes in
We want to help you with the things you find difficult so that pensions aren’t scary any more. Examples of the kind of things that people don’t understand include
what happens to my money when it goes to my pension?
am I getting value for the money I spend on retirement?
how do I join a pension?
what am I paying the people who manage my pension and how do I pay it?
how do I get to get my pension savings back?
how can I find lost pensions?
how to go about bringing all my pots together to get my money back?
this is the first of seven articles I’m writing between now and the end of March, all are about making pensions a little less scary. Helping people like these fine folk who we talked to recently in Central London.
One million people retire in this country each year. Most can look forward to the state pension , a few are lucky enough to have a company pension which will last as long as they do.
But most people get to retirement with some savings in a pension pot and not so much as an instruction manual as to what to do next.
We have started AgeWage for the 94% of people not taking advice, the 6% who do may find it useful as well.
Road-test your pension
If you get out of your car at the end of a long journey you can expect to get some details of your journey – how long it’s taken, average speed and fuel economy, how far you’ve driven.
Modern cars can tell you all this at the flick of a button.
But people arriving at retirement get nothing. Many don’t even get a statement from the people who have their money – who’ve lost touch with them. Those who get a statement often lose the will to live – it’s so damned hard.
AgeWage gives you one piece of information , a single number – which tells you out of 100 – how your pension saving has gone. If you’ve saved effeciently your score will be over 50 , if you haven’t then your score will be below 50.
We are trialling right now, if you’d like us to road test your pension , contact firstname.lastname@example.org and we’ll be in touch
If you’re used to reading the Vision of the Pension Plowman, you’ll know me- Henry Tapper. I’ve posted more than 3500 times in the last ten years.
That blog’s for pension people, but most people aren’t going to spend their time reading about pension stuff – unless it’s really meaningful to them and their finances.
So – to cut to the chase, I’ve started a new venture aimed at simplifying pensions. I’ve called it AgeWage, because that – in one word – is what a pension is – a wage in retirement that lasts as long as you do!
At the heart of AgeWage is a reckoning called the AgeWage score. It’s a single number between 1 and 100 we give to your pension pot to tell you the value you’ve got for the money you’ve paid in.
To get to the AgeWage score we need what’s called a “contribution history”. That’s a file of all the contributions you’ve ever made and what they bought at the time. If we compare your contributions and what they bought with the value of your pension pot today, we can see how much your contributions have increased by – we call this the internal rate of return (IRR).
We compare the AgeWage score with another fund – we call that other fund the benchmark fund- it’s one we’ve made up. What we actually do is to notionally invest your contributions into the benchmark fund and see what you would have got if you’d invested there instead.
Another word for the benchmark score is the “fifty score” , because the benchmark is supposed to be the average and fifty is the average between 1 and 100! If when we compare the IRR if you invested in the benchmark or fifty score, and it’s higher than what you got, you’ve not done as well as average, the opposite is also true.
This is what we mean by simplifying pensions. We think the first thing you want to know about your pension pot is how it’s doing and that’s what the AgeWage score does. It doesn’t hang about!