LEBC’s Director of Public Policy, Kay Ingram, outlines her thoughts on the upcoming general election.
The General Election gives all of us a chance to engage with our elected representatives and to make them aware of what matters to us. This Election and the Parliament it produces is likely to be dominated by the Brexit negotiations but there are still many other issues upon which we would like our MPs to focus. Here is one matter we think is important.
Encouraging more saving
The savings ratio, a measure of the share of our wealth we are saving, has, according to ONS, hit an all time low of 3.3%. The longer term average is 5% and many experts believe it should be at least 8% and ideally higher, if future generations are to be able to retire without being dependent on means tested benefits.
Those most at risk of not meeting this target are those currently aged between mid 30s to mid 50s. This group is less likely to benefit from final salary pensions, compared to older workers and will benefit less than younger workers from auto enrolment pension schemes.
It is important to the economy that future income needs can be met by saving some of today's productivity for consumption later. Failure to address this shortfall will only result in a combination of higher taxes on younger workers struggling to support an ever growing elderly population, who in turn will face lower living standards.
We would like all parties to commit to is to make saving for retirement easier. The last 3 Governments, Conservative, Coalition and Labour have endlessly tinkered with the allowances for tax relieved pension savings. While the numbers of individuals who are required to pay back tax relief, due to the lifetime and annual allowance restrictions are small, as is the revenue they generate, the complication of these obscure stealth taxes adds to the cost of retirement planning and acts as a barrier to saving.
Abolition of the lifetime allowance and a universal annual allowance for pension savings, with no restrictions for higher earners, would at a stroke make saving for retirement simpler and send a clear signal that saving for later life is a good thing for the individual and the public good.
ONS* Office of National Statistics (March 2017). More information.
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