Trust in the Government to fulfil its pension promises appears to be falling, not helped by the lack of clarity over what state pension individuals will receive. One in five (20 percent) of non-retired respondents did not know whether they would receive any state pension, the Great British Retirement Survey by interactive investor has found.
This uncertainty rose to 26 percent among people in their thirties and 53 percent of people aged 24 to 29. One respondent to the survey said: “I’m not sure there will even be a state pension by the time I get to pension age. I hope there is, but I just don’t know.”
This uncertainty over what state pension people will get, as well as general mistrust in the Government relating to whether they will keep their promises, may have been fuelled by recent announcements of changes to the state pension triple lock as well as National Insurance.
These announcements were both made on the same day and meant the Government had broken pledges from their 2019 manifesto, in which they promised to honour the triple lock policy going forward and not increase National Insurance.
The state pension triple lock had previously been a pillar of stability for pensioners, a Government guarantee that their weekly pension income would increase every year by the highest of three figures: average earnings growth, inflation and 2.5 percent.
However, due to average earnings growth soaring to more than eight percent as people returned to work from furlough, the Government decided to temporarily ignore the earnings growth element of the triple lock for next year.
In a best-case scenario where inflation comes in at around four percent, pensioners could still be getting less than half of the income increase they were expecting. It is possible this has been a factor in some of the concerns people have as to what state pension will look like in years to come.
It appears retirement is becoming a distant dream for younger generations, whose priority is getting on the housing ladder, rather than planning for retirement.
Young people relied on parents and grandparents more than ever this year, as 60 percent of retired respondents with children saying they had helped them purchase a home, usually by gifting or loaning money towards a deposit.
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Meanwhile, 37 percent of non-retired parents said the same, with five percent of these acting as guarantors for loans.
One of the biggest concerns is what the Chancellor of the Exchequer, Rishi Sunak will do next, as the Autumn Budget announcement approaches. Tax in particular ranked as a top-three financial concern for 30 percent of non-retired respondents and 25 percent of retired respondents.
The new report by interactive investor, released on Wednesday this week, is the biggest annual study of its kind, drawing on the experiences of more than 10,000 respondents answering over 100 detailed questions.
One topic which stirred the ire of respondents was the Lifetime Allowance (LTA), as rumours swirl that it could be reduced down from where it currently sits at £1,073,100.
One respondent to the survey said: “I’m penalised by the superior performance of my self-invested personal pension by the LTA, and it’s not right.”
People who save over £1,073,100 are made to pay tax, and while this seems like a huge amount of money that many people would not expect to go over, it is entirely possible for workers to approach this limit.
Another survey respondent said: “The possibility of the LTA being further reduced as inflation rises is mad.”
Moira O’Neill, Head of Personal Finance at interactive investor commented on the findings which show an apparent mistrust in the Government and apprehension over the future pensions landscape.
She said: “Saving into pensions is an act of faith – it’s something we’re encouraged to do all our working lives. So it’s not surprising that people’s faith is undermined and their tolerance stretched when the Chancellor plays Dick Turpin with pensions.
“Many engaged long term investors see the Lifetime Allowance as highway robbery and with the Treasury repeatedly signalling more tax attacks on pensions, they get even angrier.”
She added: “It’s a measure of how little people trust the Government around pensions that younger respondents are questioning whether they’ll even get a state pension. And this comes at the same time as they’re finding it harder than ever to start the journey of home ownership.
“The increase in parents and grandparents helping out may be a consequence of the stamp duty holiday encouraging people to bring forward house buying plans, but it is something we will watch carefully after raising serious concerns last year about the financial stability of the Bank of Mum and Dad.”