An article in The Telegraph discusses the need for more flexibility in the UK’s pension system to encourage young people to save more. The author, Pete Glancy, argues that many people are not saving enough for their financial futures due to the rigid nature of pension savings, which are locked away until retirement.
Key points from the article include:
- Emergency Access: Many people don’t have enough savings to cover them in an emergency or to provide a long-term income in retirement. The author suggests introducing a hardship facility that allows savers to access up to £1,000 on up to five occasions to help deal with financial hardship. This could help over 14 million people avoid problem debt each year.
- Using Pension for Property: The author suggests changing pension rules to help first-time buyers get onto the property ladder. The proposal is to allow young people to withdraw up to half of their early pension pots to go towards a deposit on their first home. However, this should be accompanied by an increase in savings rates to ensure that pension pots are large enough to support this more flexible access to savings.
- Self-Employed Individuals: The current auto-enrolment system doesn’t support the nearly five million self-employed people in Britain, almost 80% of whom are not saving for retirement at all. The author suggests that allowing these individuals access to their savings would increase the attractiveness of pensions among these workers.
- Increasing Savings Rates: The author argues that savings rates need to increase, with contributions of 15% required to deliver a moderate standard of living in retirement. The responsibility for these increased contributions should be shared between individuals and employers.
The author concludes by emphasizing the need for a system that allows people to have a retirement income that equates to two-thirds of their working income and the flexibility to save in a way that reflects changes in their lives – “People also need to believe that their savings remain theirs and to have the flexibility to save in a way that reflects any changes in their lives. Enabling people to access their money earlier in certain circumstances if they need it will increase engagement. It will give people more of the flexibility they need.”