The closest I ever come to gambling is putting a fiver on the Grand National. Each year when the National comes around I spend hours diligently choosing my horses based on the most tactical and strategic of factors: whether they have an amusing name and/or the colour of the jockey’s jersey.
In reality this process takes about 30 seconds and for the past two years has led me to plump for, among others, a filly by the name of Seabass. This is mainly however, because a number of close industry colleagues call me Seabass – and it is my Twitter moniker (@seabassc83).
Well in this year’s race Seabass trotted home in 13th position, putting my selection process in serious doubt and leading me to conclude that despite my best efforts I’m not actually much of a gambler. This might be true, but I think I still know enough about gambling to believe it is generally more risky than investing in a pension.
But it seems I don’t speak for all of my fellow folk in ‘generation Y’. Not according to a survey by State Street Global Advisors (SSgA) published this week, which revealed four-out-of-five people believe that an investment in the stock market is only marginally safer than gambling. As a result, nearly 70% of the 22 to 36-year-old respondents said they contribute less than 6% to their defined contribution (DC) scheme annually.
Furthermore, more than 80% of young people surveyed have no plans to change the amount they contribute to workplace pension arrangements in the next year and yet the average age at which these 22 to 36-year-old respondents expect to retire is 63. Yes, you read it correctly: 63!
Clearly on current form these aspirations are unachievable. But for this to change it needs to be all about instilling confidence in young people around saving through education. Sure equities – arguably the best place for younger savers to be invested for growth – are going to have their ups and downs, but that is why we place our money with those industry players who are able to best negotiate the stock market’s peaks and troughs and it is encouraging to see there is such a focus right now on delivering adequate member outcomes in DC across the board.
Betting on a horse will always be a gamble despite what any form book tells you and with DC investing there will always be some ‘unknown unknowns’. But if contribution rates, investment strategies and member education and the at-retirement process are up to scratch then DC schemes can at least provide some certainty for retirement, or at least protect from the downside as best as they can. That has to be better than crossing the line in 13th.
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