“Most people spend more time planning their holidays than they do planning their retirements,” says Ben Kumar, an expert in behavioural finance at wealth manager 7IM.
No wonder. The aim is straightforward: to have enough money to live on comfortably in retirement. But planning to achieve that aim is hard. The unknowns we have to wrestle with are so large.
And they have grown. Previously, most Britons with private pension savings retired on a fixed income. This would be a pension from a defined benefit scheme or an annuity bought with a personal pension pot.
In private sector workplaces, defined contribution schemes now predominate, pushing investment risk on to the individual. That was always the case for personal pension investors. Now, neither group is compelled to buy an annuity. Instead, they can remain invested, drawing out incomes until they die — if they do not run out of money first.
Sir Steve Webb, a partner at consultancy Lane Clark & Peacock and a former pensions minister, likens pension saving to an expedition across an unfamiliar landscape where the route is obscured by “thick fog and shifting sands”.
