Chancellor George Osborne has unveiled the government’s 2016 budget, and with it the action it is taking to help people save. With contribution from Joanne Segars, chief executive of the Pensions and Lifetime Savings Association.
For a long time, accessibility to fairly priced financial services has been a subject of debate, and finally it looks like first steps are being taken to address this. So what initiatives has the government committed to, what are the implications for the financial future of the UK population, and how will HR professionals play their part? With the aim of giving the next generation ‘choice and flexibility in their savings’ the government will increase the ISA limit to £20,000. It will also launch a new flexible Lifetime ISA for under 40s in which people can save up to £4,000 each year and receive an additional 25% bonus from government. Savings, including the government bonus, which can be accessed to buy a first home, will also allow individuals to save for their retirement, without having to choose one over the other. The government is currently assessing whether people could remove the money for a small fee and return it later, creating what Osborne described as a “flexible and fair” system.
Joanne Segars, chief executive of the Pensions and Lifetime Savings Association, called the announcement an “interesting initiative” to help younger people add to their pension and lifetime savings. “An important part of this will be to make sure that savers’ interests are protected by ensuring that the regulation on charges and governance of the Lifetime ISA are comparable to those for pensions, which have been reviewed to make sure they offer savers good value,” she said. “The government has extended the way in which people will be able to save for their retirement and should use this opportunity to agree a new consensus for pensions that focuses on the long term, builds confidence, and gives both savers and employers clarity and stability. We call on the chancellor to create a new, independent, retirement savings commission to tackle that challenge.”
The UK population is in need of more support when it comes to saving for a more secure financial future, and the ISA announcement is certainly a step in the right direction. However, the question now is how this ISA will fit with other savings such as pensions. Consumers are in need of the correct access to information, advice and guidance to empower them to make informed decisions about their financial future. How can advice be made more accessible and what can HR professionals do to facilitate this process? The government has stated it is keen to bring advice to the mass market in simpler and cheaper ways, and is looking to technology as the answer. This willingness to embrace technology, and introduce simplified, automated advice services, or robo-advisers, will go a long way to help provide cost-effective advice to consumers looking to make decisions about their finances. HR departments can select a provider and roll this out in straightforward way, and such services are increasingly being used by businesses to provide inclusive and convenient workplace support to employees managing their pensions.
Robo-advisers such as Wealth Wizards (the UK’s first online independent financial adviser) plug the advice gap by offering affordable advice via online apps. These apps, which generate a fully personalised advice report in around ten minutes, are supported by leading experts including actuaries and chartered financial planners. This new generation of accessible advice provides many more people with professional advice on their pension investments, and could address the issue of making fairly priced financial advice services more widespread. In summary, the government has extended the way in which people will be able to save for their retirement through the announcement in the Budget, which in itself is a positive step. However, there is still much work to be done to provide the UK population with a healthier financial future. Making affordable advice more accessible (e.g. through the use of automated advice) is key, so that people are given the suitable support to enable them to make informed decisions about their savings. HR professionals will certainly play their part in guiding employees through this critical process.