Former Government adviser Dr Ros Altmann is always worth listening to on the subject of pensions and savings.
Dr Altmann, (@rosaltmann on Twitter) has been pondering what the Chancellor might do to deal with the looming pensions and savings crisis.
We’re living longer after we retire, but too few of us have prepared the ground financially for life after work. The state pension was not intended to pay for several decades of retirement, and anyone facing retirement needs to think about how they will fund it.The Government’s auto-enrolment scheme is putting more workers into workplace pensions, but more needs to be done to get us saving generally.
With interest rates at an historic low, there’s little incentive for most people to save, and there’s plenty of evidence that many are dipping into our savings just to pay household bill.
Dr Altmann points out that low interest rates and cheap mortgages have benefitted the one-third of households who have a mortgage, they’ve not been so good for the other two thirds.
Among her interesting suggestions is exempting savings income from tax for the next two years. She believes a temporary tax break wouldn’t cost the Exchequer much while rates are so low, but would boost to savers’ net income.
Echoing the thoughts of the Building Societies Association and the British Bankers Association, she would like to see restrictions on ISAs (Individual Savings Accounts) relaxed so that savers can choose whether to put their whole ISA allowance into cash or stocks and shares, and be able to transfer freely between the two.
Dr Altmann has been a leading critic of the way annuities are working. Annuities, the income for life you buy with a private pension pot, have been poor value for money thanks to low interest rates. She suggests allowing as much £18,000 to be taken as a lump sum. More detail on this and her other proposals at rosaltmann.com