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Pension inertia could lead to £44billion shortfall

24 November 2009 / by Andy Davies

Around one in five young people are putting off starting a pension because they do not like the word, according to new research by YouGov.

The research, which was commissioned by AXA, has revealed that if the one million 18 to 24 year olds continue to delay starting their pension by five years, this could potentially lead to a combined shortfall in their retirement income of more than £44billion.

In addition, almost three quarters of 18 to 24 year olds associate the word 'pension' with old age, which AXA warns could result in the younger generation leaving things too late when it comes to retirement planning.

It appears young people are not alone with their dislike for the word pension, as around a fifth of the population associate the word with 'grey', while one in ten people think the word is old fashioned.

Commenting, Mike Morrison, head of pensions development at AXA, said: "It's clear that we need to get younger people thinking about their future financial stability much earlier. Trying to find a more compelling word or phrase is one simple thing we can do."

As a result of this pension inertia, AXA is now working with Collins English Dictionary, in search of an alternative word or phrase in an attempt to get young people saving for their futures.

Elaine Higgleton, editorial director at Collins English Dictionaries, is unsure why many young people have a problem with the word 'pension'.

"Perhaps it's the association with 'pensioner', meaning 'an elderly person'. Or perhaps the recent and widely reported closing of final-salary pension schemes to new joiners is part of the picture.

"Whatever the reason, the word 'pension' does not seem to be encouraging people to save for the future and a new name might give 'pensions' a new image," she said.  

© Fair Investment Company Ltd