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Industry Insights
June 10, 2024

Next government urged to address pension concerns with greater urgency

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The next government will need to make some key pension decisions “urgently”, a report from the Institute for Fiscal Studies (IFS) has suggested, warning that a failure to address growing concerns could risk storing up greater problems for the future.

The report, produced in partnership with Abrdn Financial Fairness Trust, said that while the current generation of pensioners has, in general, been better served by the mix of state and private pension provision than earlier generations were, that does not mean that will continue for future generations.

It also argued that while there has been a degree of complacency in policymaking, “there remain challenges that need addressing”, which are not made easier by the pressures that an ageing population puts on the public finances.

Some of these issues need decisions soon, according to the report, as the IFS warned that a failure to address these concerns would risk storing up greater problems for the future, risking a poor standard of living or higher future state spending than expected.

In particular, the report encouraged any new Pension Minister to decide whether and how to provide more support to those who struggle to work up to state pension age, while considering the effects on work incentives and government spending.

The IFS also argued that his is an area of some urgency, given the state pension age will rise from 66 to 67 between 2026 and 2028.

The IFS also stressed the need to put a long-term plan in place for the state pension, arguing that, at some point, whoever forms the next government needs to decide on the appropriate level of the state pension and then to increase it to keep up with earnings growth in the long run, but also at least as fast as inflation every year.

Potential workplace pension reforms were also highlighted, as the IFS encouraged the new government to decide whether to make use of new legislation that would increase minimum workplace pension contributions, and if they do, to consider how to help low earners adjust to lower take-home pay.

In addition to this, the IFS urged the new government to look address the problem of low pension saving among the self-employed, suggesting that one possible option would be to integrate pension saving for the self-employed into the self-assessment tax system.

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Matthew Sinclair (left) and Chris Breward (right), Chartered Financial Planners at Wealth of Advice