Why don’t Britons have faith in the Government’s pension policy? asks Andrew Megson, executive chairman of My Pension Expert
Public confidence in the Government’s ability to manage pension policy is currently at an all-time low.
Now that the UK is beginning to regain its economic footing in the aftermath of COVID-19, and the Government is beginning to taper down its generous pandemic support schemes, in many ways, the pension industry has had to bear the brunt of the Chancellor’s budgets throughout 2021.
Indeed, dramatic policy changes have been in full force, which, coupled with the Department for Work and Pension’s underpayment scandal in September, has left pension savers feeling left behind in the UK’s post-Covid recovery.
As such, it is hardly surprising that a recent survey of 1,268 UK adults aged 40 and over commissioned by My Pension Expert, has found that the overwhelming majority (87%) have no confidence in the Government’s pension policy.
So, what factors are driving this outlook?
Sudden changes and policy concerns
The most obvious contributing factor to this loss of confidence is the Government’s policy overhauls over the past 12 months.
According to My Pension Expert’s aforementioned research, almost two fifths (39%) said that the temporary suspension of the state pension triple lock has impacted their retirement finances. And understandably so: the pausing of the triple lock, which assures retirees of an annual rise in the state pension to the tune of either wage growth, inflation or 2.5% – whichever is greater – could cause great distress to those that depend on it in retirement. Given that pension poverty figures topped 2 million back in June, according to Age UK, many individuals may be concerned about their ability to fund their retirement.
Elsewhere, more than one in ten (11%) of those aged 40 and over said that cap on the lifetime allowance has impacted their retirement strategy. Particularly now that the cost of living is rising in line with surging inflation, this is no great surprise.
Due to these unexpected policy overhauls, pension planners are growing more and more concerned about further rumours regarding pension policy. Indeed 53% of Britons aged 40 and over are concerned about cuts to pension benefits, such as the annual allowance and pension tax relief. Together, these factors have created the perfect storm for a crisis of confidence.
Advice is vital against a changing economic backdrop
Clearly, a change is in order, and not in the vein of the dramatic policy overhauls in recent months. On the contrary, the change needed is far simpler: improving access to independent financial advice.
Indeed, My Pension Expert’s research highlighted that savers are simply not seeking independent financial advice when they need it the most. Just 12% of people aged 40 and over have sought independent financial advice within the past 12 months, which is a dangerously low figure, given the tumultuous pension landscape.
Further still, this figure indicates that individuals do not have access to financial advice, or that they do not know where to go to seek it out. Misconceptions surrounding financial advice will do nothing to improve this situation – at present, many people assume that advice is too expensive, or that they simply do not have enough money to warrant seeking advice in the first place.
Quite the contrary, advice is affordable and does not come with a minimum savings total. As such, this is where Government bodies need to create meaningful change: shifting the conversation around financial advice would make way for a more informed cohort of pension planners able to maximise their pension savings to their fullest potential.
To do so, the Government must work with regulating bodies to create educational campaigns to improve pathways to advice, beyond the remit of generic advice such as the FCA’s Investment Pathways. Such initiatives simply leave savers with the impression that tailored financial advice is out of their reach, meaning that they settle for a less than ideal substitute.
While it will take time for the Government to re-instil confidence in pension policy overnight, educating the public and providing Britons with the tools they require to save adequate for retirement should be a priority. In the meantime, savers should not be afraid to approach advisers if they have any concerns about their pension strategy – doing so will help them stay on track with their retirement goals, no matter what is happening in the political landscape.