"The DWP and the Treasury seem to be developing fundamentally contradictory expectations of the pensions system."
It says the DWP and Treasury are "pulling in opposite directions" and is urging for focus on better engagement to help individuals plan their state and private pensions, with particular focus on the self-employed and a transition away from the Triple Lock.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, commented: “The whole picture is becoming like one of those comedy images of engineers who have started building a bridge from opposite ends, only to find it doesn’t line up when they get to the middle. Unfortunately in this case it is ordinary investors who are set to suffer the consequences.
“The DWP and the Treasury seem to be developing fundamentally contradictory expectations of the pensions system. It isn’t possible to have a system which both serves the needs of flexible later-life employment patterns, and at the same time imposes ever more complications and restrictions on the individual investor.
“Philip Hammond has spoken recently of the need to look at household saving, of structural issues and the distorting effect of the housing market. The Cridland review should be part of this overall effort to reconcile these contradictions and to explore the potential for joined-up policy-making. Ultimately the UK’s pension system must meet the needs of individual savers and investors as well as delivering good value to taxpayers.”
Recent research from Aegon found that 45% of the population believe that in its current state, savings and pension policy isn’t fair, while 42% are in favour of overhauling the state pension to give people earlier access, even at a reduced rate.
Steven Cameron, Director of Pensions at Aegon UK, added: “Cridland’s review of the state pension couldn’t have come at a more pivotal time for the industry. Pension policy is at a turning point in the UK, as new reforms give people greater freedom as well as responsibility for their own pension provision; life expectancy is increasing, raising the bar for retirement funding requirements; and the average income being received by retirees is reaching a peak, but set to decline quickly as generous defined benefit pension schemes become a thing of the past. Amid all this, state pension policy needs to adapt quickly, or risk failing the people it is designed to support.
“If the Cridland Review comes to one conclusion, it should be to allow people to choose to take their state pension from an earlier age, such as 60, albeit in return for receiving a smaller payout each month. Everyone approaching retirement has different needs and circumstances, and we need a more flexible system which accommodates this variety.
“It’s also important that the government doesn’t fall into the bear trap of basing future policy decisions on the wealth makeup of today’s retirees. While today’s pensioners have income after housing costs of only 7% below those of working age, those retiring in ten years’ time won’t fare so well and are likely to rely on the state pension more than those retiring today.”
