Royal London

Ditch the jargon to close the pension gap

Ima Jackson-Obot

Features writer for Financial Adviser

Getting young people thinking about long-term pension planning is a challenge especially where technical language is concerned, writes Ima Jackson-Obot.

For most young people, words like pensions and retirement conjure up images of octogenarians on a Saga holiday or grey-haired men playing golf.

Couple this with a jargon-filled industry and poor financial literacy, it is clear the industry has a big job on its hands trying to get youngsters to save for later life.

For some pensions experts, certain words should be done away with completely.

“‘Pension’ for one. You say ‘pension’ to a young person and they cannot imagine themselves old with grey hair,” Steve Webb, director of policy and external communications at Royal London, says.

“We need to communicate that this product is a pot of money with your name on it and it is about giving choices in the future; being in control and having the kind of life you want for yourself.

“And where people are being communicated with it is pounds and pence, not percentages.”

A recent study The Millennial Money Survey - of over 4,000 UK adults aged 18-35 - found buying a property, getting married and having a family are top ambitions for 10m (64 per cent) of millennials.

“We do have an awful lot of jargon in pensions and a lot of that has grown over the years and we are not great at trying to explain it” – Kate Smith, Aegon

However, 7.8m people risk missing out on a brighter future because they do not hold any long-term savings or investment products.

Despite this, the report by F&C Investment Trust and BMO Global Asset found there is still a clear desire to build a healthy nest egg.

Poor knowledge

Likewise, a YouGov’s study last summer revealed the extent to which under-35s have a poor knowledge of pensions.

Just over a quarter (27 per cent) said they did not understand enough about them in general and those who did have a pension were not always clear about what it entailed or what type it was.

The industry is now so concerned by this that it is looking for ways to close the savings gap.

Anna Lane, chief executive of customer engagement firm The Wisdom Council, says it is critical to make financial matters accessible and engaging, speaking to people in the same way that they engage in other parts of their life.

What does this mean in practice?

“Dry language such as pensions, drawdown and projections, don’t really resonate with any generation, but are even more alien to millennials who often fail to grasp the underlying concepts behind the terms.

“Simpler and more personalised journeys to save and invest are also key,” she adds.

Kate Smith, head of pensions at Aegon, agrees: “Using different terminology, such as ‘lifetime savings plan’ might be more appropriate for younger people.

“We do have an awful lot of jargon in pensions and a lot of that has grown over the years and we are not great at trying to explain it.”

Workplace pensions

According to pension specialists, a good place to start is with auto-enrolment.

This is because it is often easier for employers and advisers to educate young people on financial issues when they first join a company. At that stage they are a more captive audience.

Ms Smith adds: “Pensions can be one of the things they talk about. They can also talk about debt management, savings and budgeting, which they may not have gotten a hang of.

“And now that they have regular income, that should become a bit easier in some ways; warming people up to the idea of different types of saving for different purposes and talking about things like tax breaks then building up the conversation as time goes on.”

She believes auto-enrolment does make things easier, because everybody will get a pension the moment they start a job, but adds it is up to the employer and the adviser to support those conversations.

Ms Smith also suggested that older people in the workplace could be brought into speak to their younger counterparts about their savings experiences.

Ms Lane says: “[Auto-enrolment] can whet their appetite, but again the critical factor is to treat that route in as an opportunity to educate millennials about the real long-term benefits of the scheme and ensure they understand what happens to their money once it leaves their pay packet, so they can feel a genuine sense of ownership of that pot.

“This will become increasingly important in retaining scheme members as contribution rates ratchet up.”


The challenge of engaging millennials with their pensions extends beyond just eliminating jargon.

Technology is crucial to bringing about change.

The millennial generation get the majority of their information from smartphones and providers will be increasingly expected to make simple information available in an app.

If you sit in a room with people who love pensions and you all agree what the communications should look like we are the last people who should do it. - Steve Webb, Royal London

Just over a year ago Mr Webb worked with the Pensions and Lifetime Association (PLSA) and some millennials to come up with money saving ideas.

“They wanted an app where they can slide their money into one place. They wanted to turn their Tesco clubcard points into money in their pension.

“It was all quite fresh and technologically driven. But they did not like the word pensions.”

Ms Lane says finding a better way to describe pensions and making it more relevant to millennials would be a huge step forward.

“For example, talk about savings rather than pensions,” Ms Lane added. “For a group who are forensically focused on saving by paying down student debt, saving for a first property and using apps to round up, saving is a much easier concept to grasp.

“In some regions of the UK, millennials have very little cash to spare after covering rental and living costs.

“What is almost more relevant however, is that very few young employees understand that, on top of their own contribution, they are effectively getting ‘free’ money and that this is a very tax efficient way for them to save longer term.”

With all the moves by the industry to get young people saving for later life, no-one has yet found the magic bullet and it is clear the industry cannot come up with the solutions alone.

Mr Webb says: “If you sit in a room with people who love pensions and you all agree what the communications should look like we are the last people who should do it.”

Ima Jackson-Obot is a features writer for Financial Adviser

Share article