How can the Government restore public confidence in pension policy?

The Government is facing a public confidence crisis.

After a turbulent financial year, with the UK still recovering from the economic aftermath of Covid-19, pressure on UK pensions has been relentless. Indeed, as the Government began tapering down its generous pandemic support schemes, questions started to emerge about how the country was going to foot the bill. And unfortunately, pensions seemed to be within the firing line, with dramatic policy changes and great uncertainty surrounding generous, albeit costly pension policy.

It is little wonder, therefore, that My Pension Expert’s survey of over 1,200 UK adults aged 40 and over found that the majority (87%) have no confidence in the Government’s pension policy.

So, what exactly has driven this downfall in confidence and, more importantly, how can it be restored?

Concern and disruption

First and foremost, the Government’s changes to pension policy over the previous 12 months have driven this decline in public confidence.

For instance, in My Pension Expert’s aforementioned research, almost two fifths (39%) of Britons feel that the temporary suspension of the state pension triple lock has impacted their retirement finances. Elsewhere, over one in ten (11%) of people aged 40 and over feel that the cap on the lifetime allowance has impacted their retirement strategy.

Yet, it’s not just definitive policies that people are concerned about – it is the uncertainty surrounding other pension benefits. Indeed, My Pension Expert’s study found that 53% of Britons aged 40 and over are worried about cuts to pension benefits, such as the annual allowance and pension tax relief.

Evidently, this combination of sudden changes to policy, teamed with uncertainty surrounding further potential changes are causing the perfect storm for a confidence crisis. Consequently, this could cause individuals’ faith in their future financial prospects to dip.

It is vital that change must happen – the question, therefore, is what must change?

Access to advice
Despite dramatic policy overhauls and uncertainty around further potential changes, there seems to be a worrying theme – people aren’t seeking advice. Indeed, just 12% of people aged 40 and over have sought independent financial advice within the previous 12 months.

This figure suggests that people simply don’t have access to independent financial advice and have no idea where to go to find it. And this is likely because there are so many misconceptions about advice; most prominently, the fact that people assume advice is too expensive, or they don’t have enough money to warrant advice.

However, advice is affordable and does not warrant a minimum savings total. At My Pension Expert, for example, we never turn away a person in need of advice. Whilst we do charge an adviser fee, the benefits of seeking tailored advice far outweigh the costs – the advice given could give people the ability to maximise their pension savings and transform their financial position in retirement.

Naturally, it is up to the Government to work with regulatory bodies to change the existing assumptions about advice, via educational campaigns and improve access to it. Free cookie-cutter guidance, such as the FCA’s Investment Pathways, simply isn’t good enough. Initiatives like these only fuels the assumption that tailored independent advice is too expensive, meaning that savers settle for a less than adequate alternative.

Of course, changing public opinion won’t happen overnight. It will take time for the Government and regulatory bodies to educate the public about the importance of advice and granting access to it. In the meantime, however, savers should not be afraid to approach advisers, like My Pension Expert, if they are uncertain about any aspect of their pension plan. Doing so will certainly help them get their finances in order and feel more confident in the face of pension uncertainty.