Thirty Billion Pounds sounds a lot of money, and indeed it is! Forty Billion Pounds sounds a lot more, and indeed it is!
Depending on whom you speak to, this is the level of money that people in the UK are not saving, and should be.
The government are only just starting to take this problem seriously.
"Well, hello. Come on in, your time is up"!
Financial advisers have been shouting this from the rooftops for quite a number of years. The timing of this attention grabbing is no accident, as two government commissioned reviews have been announced over the last few months focused on reshaping the financial services market.
Mr Sandler has decided to look at the access of financial products and simplifying the present system. He wants the industry to create a 'stakeholder' suit of products similar to the 'stakeholder' pension (described below). This he believes would give more people the opportunity to save by reducing the barriers, such as paying for advice.
Mr Sandler is all too aware that there exists a whole group of people that either do not understand financial products, or are so reliant on benefits they're unable to save. His ideas are aimed at getting these people to squeeze a few quid out of their weekly budget. The new products would include a low cost Unit Trust and Investment Bonds, with low charges. This would mean you could buy a whole range of financial products direct, and without advice.
Even with the proposals on the table, how keen are the product providers on serving this market? The products have such low charges; there is little room for remuneration advisers, marketing the product and administration. We've already seen certain pension companies quietly reducing their focus on Stakeholder Pensions.
The Pickering report has looked at making pension provision stretch further, and making pensions more attractive.
At present the National Insurance we pay into the system each week, is used next week. You don't have to be Carol Vorderman to work it out – less people working, plus more people retiring equals more people need looking after with fewer taxes to do it!
There are many worries over large companies changing the way they run their pension schemes. Instead of defining what the member receives and guaranteeing to meet the amount, come what may, companies are switching the liability onto the employee.
By switching their pension schemes to defined contribution, companies are making the final benefits received by the employee dependent on the performance of the assets. With the Stock Market under pressure, once again you don't need to have a mind like our Caz, to work out what that means.
The Pickering report has suggested that by reducing, or scrapping dependents pensions within occupational schemes (this is the amount a spouse or partner receives when the owner of the pension income dies), this would allow companies to maintain their present type of scheme.
The report also suggests that the indexation of benefits will mean people retiring will not have a rising income in line with inflation. Both of these products place more focus on the employee to provide for themselves. Both suggestions would mean the employee having to make further provisions to safeguard against: -
Pickering wants all commissions on financial products scrapped, and Independent Financial Advisers to work on a fee basis only.
Take a look at the second article in our two part series - Savings gap solutions.
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