We need a Government that takes constructive action to defend against the UK’s worsening retirement crisis, says Andrew Megson, executive chairman of My Pension Expert.
Liz Truss would never have envisaged her premiership would begin the way it has. Three days into taking the top job came the tragic news of Her Majesty Queen Elizabeth II’s passing, with this monumental moment in British history overshadowed all else, even the new Prime Minister and her reshuffled cabinet.
In due course, all eyes will turn back to the pertinent issues that the new-look Government must tackle – namely, people are awaiting a plan for how it will address the cost-of-living crisis.
There were promising signs as one of Truss’ first announcements was a two-year energy price cap, starting in October, meaning annual bills will hit a ceiling of £2,500. Additionally, a “mini-budget” rumoured for 21 September, suggests that further action is expected to come. This will offer Truss and Kwasi Kwarteng, the new Chancellor, the opportunity to present the economic blueprints for dealing with rising inflation and interest rates, as well as the looming threat of recession.
Meanwhile, pension planners and advisers will be keeping a keen eye on another appointment, as Chloe Smith takes on the challenging role of Work & Pensions Secretary.
Certainly, Smith and the rest of Truss’ government will have to react swiftly to the UK’s worsening retirement crisis. My Pension Expert found that two-fifths (37%) of over-40s believe the cost-of-living crisis has made retirement impossible for the foreseeable future, and just over one in five (21%) have delayed their retirement date due to rising inflation.
Those who are about to retire or have already retired will undoubtedly be looking to Truss, Kwarteng and Smith for prompt, decisive action. So too will paraplanners.
What actions are needed?
Various questions regarding policy have emerged in the last week, including whether the Government will increase the money purchase annual allowance (MPAA) of £4,000.
Elsewhere, experts are urging the new government to pass legislation committing to a 10-day pension switch guarantee. This would potentially make switching between pension providers and programmes faster and simpler.
For me, the Government should also focus on delivering the Pension Dashboards Programme, which will allow pension planners to see all their retirement savings in one place, which will be invaluable when it comes to helping people to better understand their retirement prospects.
However, the launch of the pension dashboards has been repeatedly postponed; as a result, it is currently anticipated that the most will not have access to their dashboards until 2024. Others may face an even longer wait and only gain access in 2026. Smith and the Department of Work & Pensions ought to make every effort to hasten the dashboards’ arrival.
Improve access to advice
Vitally, accessible advice must be a primary target for Truss, Kwarteng, and Smith. Savers need to understand the benefits and means of accessing independent financial advice, which would allow them to create an informed retirement strategy tailor-made to their retirement needs.
My Pension Expert’s report mentioned above found that, despite concerns over their finances and retirement plans, just 5% of retirees in the UK have sought financial advice in 2022. Among over-40s still in work, only 13% have spoken with an adviser this year.
With inflation figures predicted as high as 18% and interest rates rising, advice is a vital tool that can help guide pension planners through these challenges and create a secure plan for the future. It is vital that the Government commits to working closely with regulators, and advisers themselves, to ensure that this is possible.
The current economic climate and the resulting financial anxieties felt by retirement planners have highlighted the importance of advice. I hope Truss’ new government not only understands this, but also strives to create accessible pathways for people to get much-needed advice by educating on its significance in creating a strong retirement plan, and how to find reputable, regulated advisers. Doing so will be critical in helping savers continue working towards the financially secure retirement they deserve.
