Govt urged to establish long-term savings commission

The government has faced renewed pressure to launch a long-term savings commission, after a new report from the Lang Cat, commissioned by People’s Partnership, revealed a "striking disconnect" between government aspirations and what the industry can deliver.

The report, How do you solve a problem like defined contribution (DC) pensions, raised concerns over the lack of a strategic plan around what is needed from the UK’s long-term saving system and how it’s going to be delivered.

In addition to this, the report warned that there is a "striking disconnect" across government policy and between the government's aspirations and what the industry feels it can deliver on issues.

For instance, while the government has set out optimistic plans for fewer, bigger, better run pension schemes, investing in the UK economy and delivering better returns for members., the report found that the industry fears progress will be slow, making it impossible for consumers to engage and keep track of their savings.

Small pots was another area of disconnect, as the report noted that although the government is pushing ahead with plans for default consolidators, the industry sees the solution as complex to deliver and is concerned about the lack of urgency from government.

In addition to this, it pointed out that whilst the government holds high hopes for the development of collective defined contribution (CDC) pensions and the industry’s capacity to deliver them, the industry fears a lack of commitment to any roadmap will result in inaction.

Given this, the report argued that an over-arching strategy needs to bring together pensions, housing, welfare and later life care, suggesting that an independent long-term savings commission would help the government and other stakeholders drive much needed reform.

According to the report, a long-term savings commission would also help provide continuity despite changes in government, and look to identify and, where necessary, commission relevant research.

For instance, the report pointed out that no data is being collected on ordinary savers and whether they are making sound decisions about their pensions, warning that without this data, there can be no interventions.

Commenting on the report, People’s Partnership director of policy, Phil Brown, stated: “This research gives us the clearest picture yet of how the pensions industry is contemplating some of its biggest long-term challenges.

“It’s vital that politicians from all parties, the pensions industry, employers, and unions reach a consensus on how we build on the success of automatic enrolment.

“While a new commission would be an important and welcome step, long-term strategic change in pensions will only be possible with the full support from the government of the day.

“Pensions are crucial to building stronger financial foundations for millions of people, meaning they must be viewed as a political priority.”

Adding to this, Lang Cat director of public affairs, Tom McPhail, said: “In spite of major reforms over the past 15 years, we still have pension system that lacks a coherent strategic purpose. Initiatives to address individual aspects of the system have been fragmented and lack consensus.

“People aren’t saving enough and they’re not able to engage effectively with the key decisions they need to take. We have a proliferation of small pension pots that many people don’t even realise they have.

“We have a peculiar workplace savings system that causes admin headaches when people move jobs. And that’s before we even start looking at the horrendous complexities of the pension tax system.

“These are major issues that are not being addressed. The only realistic way we can tackle them is by setting up an independent long-term savings commission that can make recommendations for all savers, and that will enjoy cross-party support. We owe it to future generations to work together.”

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