Following last week's General Election, many experts have
suggested the result will cast new doubt over critical changes to
the state pension.
With the Government's hands tied by Brexit negotiations and no
overall majority, it is likely that difficult decisions will be
kicked into the long grass.
But in order to avoid an inter-generational savings crisis, the
new minority Government cannot afford to delay any longer the much
needed reform we need to an unsustainable system.
Figures from the Institute of Fiscal Studies show that in 50
years' time, raising state pensions in line with the triple lock
will cost around £17 billion more than raising state pensions in
line with earnings.
The Conservative manifesto included a commitment to scrapping
the triple lock by 2020, but there is rising speculation that the
deal with the Democratic Unionist Party will result in a scaling
back of this commitment.
Once again, it appears that meaningful reform is going to fall
victim to political maneuvering.
The manifesto also alluded to future rises to state pension
ages. After delaying its response to the independent Cridland
review of the state pension age last month, we'd urge the
Government to deliver certainty by setting out its plans on when
and by how much they will increase state pension ages.
As life expectancies continue to rise, thousands will be facing
the prospect of severe levels of poverty in later life, unless
people are clear about the need to save. The Government owes it to
the public to take proactive steps to help people plan ahead to
counteract the inevitable reduction in state support.
We would also urge the new Government to give serious
consideration to earlier calls for the establishment of an
independent pensions commission tasked with encouraging a savings
culture in the UK.
We understand that minority government brings with it some
significant challenges, and that Brexit will continue to consume
government resources in the next couple of years. But without
action we are facing a state pension train crash.
It is time for a "strong and stable" government to introduce
reforms that address the demographic and economic pressures that
are not simply going to go away.
The advice profession will be key in supporting a return to a
savings culture and the Personal Finance Society will continue
raising awareness and pressing the political agenda.
About the Blog
In this blog Personal Finance Society CEO Keith Richards will be
keeping you up-to-date with all the Personal Finance Society news,
projects and initiatives that we have in the works.
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