Turning Britain into a nation of investors has been an admirable aim of the government over the past year, but it’s still only one part of the wider financial picture.
Adding financial education into the school curriculum will play a big part, but it’s also important that people at both extreme ends of the financial scale are not overlooked: those in low income households or who have not previously managed to build up their initial savings pots at all, and thus aren’t yet in a position to invest, and also those for whom investing isn’t suitable - perhaps because their stage of life makes taking on additional risk less attractive.
The latter is a tricky area to overcome. A carve-out for retirees in changing cash ISA limits is a sensible step, but pension savings need to be boosted too.
There remains real concern around later life financial security, with the ballooning state pension cost likely to force a change sooner or later and a significant number of British people, including self-employed individuals who have no workplace pension, not saving enough for retirement.
It makes some of the data and research shown across National Pension Awareness Week all the more pertinent, and highlights why educating and encouraging people around the use and benefits of ISAs and Self-Invested Personal Pensions (SIPP) remains vital.
For some people, the biggest barrier has been ease of use or accessibility: getting their financial picture in one place, having the option to easily manage their money without needing to go to three or four different locations.
That’s what made a SIPP the next logical step for Trading 212, says George Mantilas, the firm’s chief operating officer, given the number of people who have taken steps into everyday investing with their stocks and shares ISA product.
“It was really the next obvious choice that, for the average investor as they move along their financial journeys, should be the pension,” he told The Independent.
Getting Britain to think in slightly longer terms about growing wealth is a mission the government has now embarked on, but as Mr Mantilas says, it’s a deep-set approach they need to overcome.
“We were told, ‘buy houses’. That’s kind of the only real investment we spoke about in previous years and we don't really speak about or think about pensions, other than your workplace pension.”
One thing is to have a product and hope to change people’s approach, however; an entirely different one is to overhaul a huge number of alternative providers, many who have been building customer bases or offering services for decades. So how do you compete with legacy?
“Trading 212’s main appeal has always been its low fees - we don’t have custody fees, platform fees - the only cost is the same as other products we have, a foreign exchange fee which is one of the lowest in the market. That’s number one and it was prior to the SIPP,” Mr Mantilas says. Initially there’s a similar effect, with “a lot of inflows” as people transfer pensions, new and existing customers alike, in the early months of the product.
“Hopefully that means they are consolidating, that’s a good thing and what the government want, for people to have better visibility and control,” he adds.
Senior SIPP specialist Charles Garment notes that they are seeing “young people choosing to take an active role in contributing to their pension”, which is a positive, especially given the outsized benefits that decades in the market can have while young people progress through their careers.
Previously an issue with moving pensions has been time, admin and uncertainty, but tech has moved on and he describes the current process as more akin to a “Domino's Pizza order tracker for pensions,” showing the steps of the transfer along the way.
The keys for having more people be comfortable in retirement sound simple, even if putting them into action is not.
More awareness over the benefits of time when it comes to money, and having more intent to engage in their own long-term security, are vital parts of financial literacy.
For pensions, for example, that comes in the form of tax efficiency. “One of the key things on a pension is the tax benefits that you can get from it,” added Samantha Blasiak, senior SIPP specialist. “So in a SIPP, we will claim basic rate tax relief on all personal contributions paid in for customers, but then for higher rate taxpayers, they can also claim their additional tax relief directly with HMRC.”
The incoming UK pensions dashboard should encourage yet more taxpayers to engage with their futures earlier and more easily, boosting Brits for the long term.
After all, the biggest benefit of saving for retirement as early as possible is that compounding works hardest when given more time, rather than you - the saver - having to add larger amounts further down the line, when retirement can suddenly feel a lot closer, a lot more uncertain and a lot more of a burden to manage.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
