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McPhail says Government must set target savings rate

Hargreaves Lansdown is urging the Government to introduce a target savings rate similar to the Bank of England’s inflation target to focus policymakers on reducing the UK’s dependency on debt.

The Government is undertaking a range of policy initiatives designed to increase savings levels and improve the value for money customers get from financial products.

These reforms include automatic enrolment, making it easier for people to transfer small pension pots from job to job and improving the disclosure of pension charges.

The Government has also been actively involved in putting together the Association of British Insurers’ shoppingaround code of conduct.

However, Hargreaves Lansdown head of pensions research Tom McPhail says these initiatives are often in direct conflict with other policy ideas.

He cites the RDR’s effect on the ability of people with small pension pots to access independent financial advice as an example of a reform which runs counter to improving savings rates in the UK.

He says: “We have got a lot of policy initiatives on workplace pensions, advice and financial capability but at times they appear to be in direct conflict with each other.

“There is widespread recognition that the UK is overly reliant on debt and is not making adequate savings provision for the future. Given this context, a Treasury policy which is specifically targeted to increasing savings behaviour and household savings rates seems like an obvious solution.

“A specific benchmark would be the right place to start because that clearly focuses policy activity and wider public expectations around what kind of outcomes we should be looking for.”

Yellowtail Financial Planning managing director Dennis Hall says: “This sounds like a reasonable idea but it is not necessarily in the Government’s interests to get people to save more. At the moment, they need people to start spending money.”

The Treasury declined to comment on the issue.

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