Govt 'spend our way out of recession' attitude will damage pensions' savings
The government has been accused of hampering pensions savings by encouraging UK consumers to spend their way out of the current recession.
Earlier this week the government announced the rate of VAT will be cut from 17.5 per cent to 15 per cent from Monday (1 December), sending out a clear signal it wants the UK to spend to get the economy moving again.
However, Rachael Vahey, head of pensions development at Aegon, believes that the government is sending out contradictory and damaging messages.
"I look at the Pre-Budget Report and think what the government is actually saying is, 'I’ll give you a little bit more off VAT so off you go and spend'."
Speaking at the Sesame annual conference yesterday (27 November), Vahey said the government must take action now to promote pensions savings, despite the economic turmoil and not wait until 2012 for the introduction of personal accounts.
"That’s a contradiction that’s going to be tough to overcome," she said.
"The government has got to lead an overall sophisticated education regime that promotes pensions and encourages people to start saving now."
According to Just Retirement’s head of retirement solutions Nigel Barlow, people are already cutting back on their pension contributions as a short-term affect of the tightening of credit.
"There’s a lot of confusion and it they’re able to defer their decisions to retire and withdraw funds, those that have the flexibility are doing that.
"In the long term, I expect the current volatility will make people more aware of pensions and more willing to review pensions, and I imagine to see is an increase in demand for advice both in the run up to retirement and at retirement."
Vahey added: "A lot of people are certainly going to need help and advice going forward. And now is the time for IFAs to show their worth."