The unveiling of Liz Truss as the UK’s prime minister already feels like a long time ago. Such has been the momentous nature of events since her victory in the Conservative party leadership contest, Truss’ move into 10 Downing Street has been largely overshadowed.
Nevertheless, the new prime minister is facing many stern challenges. There is not a day to waste in addressing the cost of living crisis, which is infiltrating all elements of consumer and business life.
To that end, it was positive to see one of Truss’ first announcements being the implementation of a two-year energy price cap, starting in October, meaning annual bills will hit a ceiling of £2,500.
It is a marked increase on what people were paying 12 months ago but will prevent bills spiralling out of control entirely – indeed, the cap will have been welcomed by most people across the country, but it is merely one piece of a very complex puzzle.
Big government and the new cabinet
Big government, as it is termed, is back in full swing. Following years when ‘devolution’ had become something of a political watchword, the pandemic and current inflationary pressures have forced a more traditional top-down approach to government, with Whitehall dictating day-to-day life to a greater extent than we have seen in recent decades.
As such, Liz Truss’ new-look cabinet requires attention; the people chosen for key positions are going to have a notable impact on the path the UK steers out of the current economic crisis.
Where pensions are concerned, there are two key roles to focus on: Kwasi Kwarteng, the new chancellor; and Chloe Smith, the new work and pensions secretary.
Indeed, the actions taken by the triumvirate of Truss, Kwarteng and Smith will shape how people are able to ride out the cost of living storm. For financial advisers, monitoring these actions will be of vital importance – policy and reform could impact the pension plans of those approaching or in retirement.
Addressing a retirement and pension crisis
We would all like a clear overview of the new-look government’s economic strategy. But crystal ball gazing is foolish; it will be best to wait for the so-called ‘mini Budget’, which is likely to be delivered on September 21. This will shed light on the immediate priorities of the prime minister, chancellor and their teams.
For now, we can stick with what we know. Namely, that there is a retirement and pension crisis gripping the UK. Advisers will no doubt be seeing this first hand.
Indeed, in a letter to the Work and Pensions Committee (dated July 20 2022), pensions minister Guy Opperman stated that approximately 12mn people are currently under-saving for their retirement – equating to almost two-fifths (38 per cent) of the UK’s working population.
And evidence suggests that chronic under-saving is having an inevitable knock-on effect on retirement plans.
Indeed, My Pension Expert’s own research, conducted among 2,000 UK adults, found that almost two-fifths (37 per cent) of over-40s believe the cost of living crisis has made retirement impossible for the foreseeable future.