View more on these topics

Tim May: Long-term savings market needs a serious rethink

Tim-May-MM-Peach-350.jpg

Last week’s call by Treasury select committee chair Andrew Tyrie for a major Government-commissioned review into the long-term savings market is welcomed by the wealth management industry.

Recent reports on the UK’s savings gap, or timebomb if you prefer, reveal some startling facts about the need for us all to prepare for our financial futures.

A report last month from the think tank Policy Exchange suggests 11 million of us are at risk of entering ‘pensioner poverty’ when we retire.

This means anyone earning the average wage of £27,000 will need to set aside more than six and a half times as much again to generate the Government’s recommended retirement income of £16,200. The average pension pot is estimated to be just £36,800, which on current annuity rates is enough to generate a retirement income of between £1,300 and £1,500; the average earner would need a pot of around £240,000, assuming they receive the full single tier pension. The think tank concludes if you were not saving a great deal before, it is time you started thinking about putting a bit more away each month.

HSBC’s annual ‘Future of Retirement’ report found that two-fifths of retired people in the UK admit they had not prepared adequately for retirement, while a recent report from Aviva found almost a third of British families have less than £500 in savings.

When taken together with the Office for National Statistics’ data showing a fall in the household saving ratio, you can see this is something we and Government cannot ignore.

We can understand why people do not save enough, particularly when they are young. Usually it comes down to other priorities and commitments, which begs the question of whether Government should intervene? There is also the assumed psychological point that today’s young people have grown up in a climate of “buy today”, often based on credit facilities. Such an attitude flies in the face of saving for the future.

Policy Exchange suggests saving for our pension must become compulsory. There is an argument this needs to happen, given the facts, but perhaps it demonstrates the point that our society needs to have a very serious rethink on the subject of savings.

Savers need certainty and straightforward products. Last year’s rumours that the Treasury was considering a £100,000 cap on the total amount people could hold in their Isas only exacerbated the uncertainty for individuals. People know they need to save, but they need to be encouraged. Isas remain as popular as ever because they are so simple to understand. The Government might be well advised to look how this can be enhanced and indeed replicated for pensions.

A review into the long-term savings market would be just that. We cannot afford as a society to have our adult population believing that preparing for their retirement means starting to put money away as late as 40. They need a system they know works to their benefit and encourages them to save as early as possible.

As we approach the Budget, the WMA believes the Chancellor’s priorities should include not only those growth measures essential to sustaining our economic recovery, but also long-term policies to help individuals and families to prepare for their own financial futures – and, if necessary, to incentivise them to save. We have to find ways to change mindsets so more of our futures are catered for appropriately.

If this doesn’t happen, then perhaps Mr Tyrie’s calls will grow louder. 

Tim May is chief executive of the Wealth Management Association

Recommended

Lloyds-Banking-Group-640.jpg
1

Lloyds ups PPI provision by £1.8bn as it looks to restart dividends

Lloyds Banking Group says it is setting aside an extra £1.8bn to cover its PPI liabilities as it reveals it hopes to start paying a dividend again later this year.  In a statement to the stockmarket this morning, ahead of its results next Thursday, the bank says its projected complaint volumes will not fall away as […]

Jon Dixon Attivo 700

Chase De Vere corporate sales head Jon Dixon joins IFA consolidator

Adviser consolidator Attivo has hired Jon Dixon as employee benefits director. Dixon joins having held the position of corporate sales manager at Chase De Vere until December. Dixon will oversee the firm’s plans to offer automatic enrolment advice to small and medium sized businesses. Attivo Group chief executive Stephen Harper says: “Attivo Group’s employee benefits […]

Natalie Ceeney 04
3

Advisers question Ceeney’s ‘gamekeeper turned poacher’ move to HSBC

Advisers have questioned whether senior regulatory figures should be able to move straight into private sector roles following Financial Ombudsman Service chief exec­utive Natalie Ceeney’s appointment by HSBC. Ceeney has been appointed as head of customer standards at HSBC, and started at the bank on 3 February. She left the FOS in November. She will […]

Aviva-Reception-Interior-2013-700.jpg

Aviva launches provider-neutral auto-enrol tool for advisers

Aviva has launched a free provider-neutral automatic enrolment planning tool in a bid to help advisers manage an anticipated capacity crunch this year. The ‘auto-enrolment planner’ allows advisers to manage the staging dates of multiple employers from one central online hub, providing standard templates or bespoke plans for each employer. It also manages the communication […]

Protecting long-term savings from short-term policy

By Jamie Clark, Business Development Manager The pensions revolution is almost upon us. As with any revolution, there will be winners and losers. The winners in this case could presumably be the politicians that orchestrated pensions freedom and choice just before the general election. As for the losers, there may be many thousands of people […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com