Do our clients "save" or "spend on their future"

If we invest in our business, we call it capital spending. If we invest in our retirement, we call it "saving for old age".

I regard capital expenditure as a positive investment in our capacity to pay salaries and dividends in years to come.

I regard "saving" as cost-containment; while necessary it is a means of reducing liabilities not a growth strategy.

All too often we confuse investment and saving money, the two are not the same thing!

The distinction was explicitly made by Victoria Derbyshire when she ran the morning show on Radio 5 live. Nicki Campbell asked her is she saved into a pension

She did that girlie laugh and turned on Nicki

I can't save - I love spending!

But then she explained.....

Every bit of money that she put in her pension plan was money spent on her retirement.

Most people will find this empathically right. Saving is an act of denial, an act that prevents rather than enable.

Going into a shop and spending money is an affirmative act that relieves the desire (as well as the wallet). That’s why we talk of retail therapy.

Those who argue that we should save more are demanding denial. It’s the kind of puritanical behaviour that gets right up our collective noses. Telling us to buy an annuity is hardly any better. I will choose how i spend my spendings think you very much!

Re-reading the Treasury Command Paper; “Freedom and Choice in Pensions”, I am struck by the emotional intelligence of the document. The Treasury get it.

This is why the really good communicators can convince us, it is not just because they use worlds that are emotively loaded (spend and save) (bargain and rip-off), it is because they insert these words into stories.

Alvin Hall, who I heard speak live last week, talks about the “narrative” that he uses to engage with his listeners. In his half hour talk, there were a number of memorable stories , all of which remind me of the point he was trying to make.

It is these subtle nuances of story-telling, this use of emotive language to sign-post you in the right direction which is the skill of the polemicist.

When we ignore these skills and forget what power is invested in words and stories, we lose the argument.

No amount of statistics , nor charts , nor equations can outfox a foxy storyteller.

Victoria Derbyshire explained the save and spend point by telling a story about her Dad, who reminded her how much better she was at spending than saving.

“Just remember to spend on the future”

he told her- that’s what she does!

The way we talk with our clients is really important and it doesn't matter whether the client earns £10k or £10m, making simple distinctions between investment and cost saving matters.

I believe practitioners have a duty to encourage clients to think about getting the balance between capital expenditure and cost saving. I also think that encouraging them to think about how much money they can spend on their retirements is a part of business planning.

Thinking about pension planning as part of the business planning process may be counter intuitive to most of us, but if we adopt the clear-headed thinking of Victoria Derbyshire- it makes sense.

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This blog

Everybody in the pension world knows about the Pension PlayPen. it's a Linked in group, a website to choose pensions and it's a blog for the thoughts of its founder Henry Tapper.

The Pension PlayPen exists to encourage people to see Workplace Pensions as of benefit both to employers and to their staff.

George Osborne has gone a long way to helping us - giving freedom and choice to people to spend their retirement savings as they like.

But there are many other good things going on. Not least the abolition of commissions , the capping of charges, the introduction of better governance and a general improvement in the way pensions are presented.

This blog is here to get the message out to the thousands of practitioners , finance directors and others who will have to choose (or help others choose) a workplace pension as part of the auto-enrolment process.

We won't spend time here talking about the intricacies of auto-enrolment itself. We know about it but we'd rather you read about it from our friends at ITM (who trade as EASE). We know a lot of great IFAs and HR contractors who can help you implement your AE processes and we know a fair bit about payroll, but our particular interest is in retirement and helping employers make the most of the contribution payable under the new rules.

So please feel free to ask us questions and we'll do our best to help.

Advice to employers is not regulated so there is nothing to stop you adding value to your or your client's business by "getting expert" on workplace pensions.