Daily Politics soapbox: Pensions an issue for old and young

Pensions should be mentioned in EastEnders as they are an important consideration that young people should be talking about and preparing for their financial retirement, says pensions specialist Margaret de Valois.

Everyone needs to save more for their retirement. It is not rocket science - the earlier you start saving, the more you will have when you stop working.

But how does a pension work? There are two types of pensions commonly used in the UK.

One is called final salary - or defined benefit - and the other is called money purchase - or defined contribution.

Not all bad news

Final salary pensions are most often provided by an employer, and promise to pay you a regular income after you retire. It does not matter how much you put in as your pension depends on what you earn, not how much you save.

If you have a final salary pension you are lucky, as they are relatively generous and are becoming rarer.

If you are not lucky enough to be in a final salary scheme then you will have to use the other type of pension, money purchase. But it is not all bad news.

Every time you pay into a pension, so does your employer, and so does the government via tax relief. A pension should, therefore, be a better way to save for your old age than putting the money in the bank.

If you are self employed you can still contribute to a personal pension, which works in the same way.

Why is saving important?

Until recently, many people retired in their 50s or 60s and could be expected to live another 10 or 20 years.

Now, with medical advances meaning people live longer, many could be retired for almost as many years as they actually worked.

Think of this as having lots of "gap years" at the end of your life.

If you want to enjoy these you are going to need a lot of money saved up.

The earlier you save, the more time your money has to earn interest and the larger your pile of cash will be when it is time to kick back and have fun.

So pensions are a young person's issue, not just an old person's issue. Young workers need to save from day one in their careers.

Using the comparison again, many young people manage save for something specific like one gap year, or a sabbatical to travel the world in their 30s - so why not the same focus on their pension, which is pretty much the same thing, but longer?

Pensions is a long term game - like elderly care and health - but politicians need to balance the short term game of winning elections, and being popular, with longer term decisions that, whilst possibly difficult now, would have a positive impact on generations in the future.

The government has done well to introduce automatic enrolment into the workplace.

This means that everyone between aged 22 and retirement age must be put into a pension scheme if they work.

Margaret de Valois will talk pensions on Wednesday's Daily Politics

The date at which you are put into a pension scheme will depend on the size of your employer, but the process is well under way.

If you are about to be "auto-enrolled" it is important that you understand what will happen to your take home pay when it happens.

Some people might be shocked by the drop in their monthly income and decide to opt out after all, which may not be the best thing to do in the long term.

So it is not just politicians who have a part to play. You do. We, the pensions industry, certainly do. The media also needs to make pensions more mainstream.

Who's talking about saving for their old age in EastEnders, eh?

Pensions are an issue for us all. We need to understand them better, and then we need to get saving.

She was a guest on Wednesday's Daily Politics and debated with Conservative chairman Grant Shapps and Labour MP Margaret Curran. The full programme, including that debate, will be on BBC iPlayer for seven days.