Liz Truss’ first ten days as the UK’s new Prime Minister could hardly have been more turbulent. Just 72 hours after being announced as the victor of the Conservative Party leadership campaign came the tragic news of the passing of her majesty Queen Elizabeth II.
After a remarkable, exemplary 70-year reign, the Queen’s death has naturally overshadowed all else. As the gloomy clouds clear, however, attention will once again turn to the new Prime Minister – and her new-look cabinet – to establish how they will tackle the pertinent issues at hand.
The cost-of-living crisis is top of the Government’s in-tray. Indeed, one of Truss’ first announcements was that annual energy bills are to be capped at £2,500 between October 2022 and October 2024.
More action is likely to follow, with a “mini-budget” touted for 21 September. This will give Truss and Kwasi Kwarteng, the new Chancellor, the chance to lay out their immediate priorities from an economic standpoint.
For pension planners, the other new face of note is Chloe Smith, now Work & Pensions Secretary. Without question, people approaching or in retirement will be hoping for swift, decisive action from Truss, Kwarteng, and Smith.
How is the cost-of-living crisis affecting retirement plans?
My Pension Expert recently commissioned an independent survey among 2,000 UK adults, uncovering how the cost-of-living crisis is affecting retirement plans.
We found that two-fifths (37%) of over-40s believe the cost-of-living crisis has made retirement impossible for the foreseeable future. Just over one in five (21%) have delayed their retirement date due to rising inflation.
Of those in retirement, 12% say rising inflation has “upended” their retirement plans. More than a third (34%) of UK retirees are worried they will no longer be able to sustain their desired lifestyle in retirement as the cost-of-living increases so sharply.
These are stark figures, underlining the size and urgency of the task that Chloe Smith and the Department for Work & Pensions must do to support pension planners. But what action can we expect?
What could the new-look government do?
So far, we know that the new PM is committed to sticking with the state pension triple lock. But a number of other suggestions have surfaced in the past week.
For example, some in the pension sector have questioned whether the Government will review the money purchase annual allowance (MPAA) of £4,000.
The MPAA refers to when someone starts to take money from a defined contribution pension pot –usually, you can receive tax relief on pension contributions up to £40,000, but this falls to £4,000 when someone starts to withdraw from a defined contribution pension. Some are asking for that threshold to rise.
Others are pushing for the new-look Government to legislate a 10-day pension switch guarantee. This would make it quicker and, hopefully, easier for someone to switch between pension providers and plans.
At My Pension Expert, we would like to see the Government commit to and invest in the Pension Dashboards Programme. This is designed to allow pension planners to see all their retirement savings in one place.
The pension dashboards have been delayed numerous times – it is now expected that most people will not have access to their pension dashboard until 2024, which is five years later than originally planned. It would be positive to see the Government shorten its timeline as much as possible; empowering pension planners with faster, easier, and more convenient access to their own financial information will allow them to make better decisions.
Access to advice
Improving access to advice ought to be another key priority for Truss, Kwarteng, and Smith in the weeks and months to come.
The recent My Pension Expert report noted above found that, despite concerns over their finances and retirement plans, just 5% of retirees in the UK have sought financial advice in 2022. Among over-40s still in work, only 13% have spoken with an independent financial adviser (IFA) this year.
The advice offered by trustworthy, regulated experts like My Pension Expert can make a huge difference at times like these. In a turbulent climate, with inflation soaring and interest rates rising, advisers can help guide pension planners through various challenges and create a robust plan for the future.
At My Pension Expert, we do this by taking the time to understand each client’s circumstances and needs. We can then tailor our advice to them.
Advice has seldom been more important than it is now. The new PM and her senior team have the chance for a renewed push to raise awareness of the importance of advice and where to find it. It could make all the difference for pension planners as they navigate the cost-of-living crisis.