The Personal Finance Society (PFS) is calling on the new government to establish an independent commission in a bid to avoid an intergenerational savings crisis.
Ahead of the Queen’s Speech tomorrow (21 June), the PFS said the reality of facing a minority government for an indefinite period means it would be very difficult for tough but necessary decisions to be made about controversial issues like funding state pensions and long-term care.
Normally, these issues would be dealt with through a decisive election result, followed by a series of budgets and spending reviews, but with the government’s hands tied by Brexit negotiations and no overall majority, it is likely that difficult decisions would be kicked into the long grass.
However, the PFS argues people have the right to know the facts to help influence plans for their financial future now, and to do that effectively they need to know how much state help they can expect in future, and where current benefits are likely to be reduced or state retirement age moved even further out.
Keith Richards, chief executive of the PFS, said: “We can’t ignore the demographic and economic pressures facing our economy, and the new government has to take responsibility for easing these pressures by making difficult decisions and introducing brave but prudent measures so that the public have a choice of mitigating any personal impact on them and their families.
““Understandably, Brexit will consume government resources in the next couple of years but we must not let it detract from the economic and social challenges we face at home.
“An independent pensions commission was able to achieve a cross party consensus about auto-enrolment that has stood the test of time. We need the ongoing involvement of independent experts to avoid an inter-generational savings crisis.”
Following publication of John Cridland’s Independent Review of the State Pension Age in March, the PFS wrote to chancellor Philip Hammond urging him to rethink the short-term pensions strategy and to move forward with the report’s pragmatic recommendations.
In his long-awaited final report, Mr Cridland recommended raising the state pension age to 68 between 2037 and 2039.
After that, he recommended allowing it to increase in line with longevity expectations, but by no more than one year every decade.
That would mean the state pension age could reach 70 by as early as 2057 - affecting anyone born after 1987.
In the letter, the PFS also put forward the idea of an independent pensions commission, tasked with establishing sustainable measures aimed at addressing the issues facing the public in retirement.
emma.hughes@ft.com
