This Budget was “a Budget for savers” and many of the reforms to savings are positive steps in the right direction, helping to increase the number of people putting something away at the end of the month.
Yet these measures will only go so far given continuing economic pressures.
Economic growth continues to rely on consumption which in the absence of real income growth is dependent on rising household liabilities.
Unless incomes rise fast enough – and evidence suggests that they are not – the UK’s savings ratio will continue to be eroded. Ultimately broad-based economic growth is the best hope for an improvement in savings.
We focus primarily on measures that are likely to impact on, or address the challenges of, an ageing population.
We are not therefore just concerned with how policy will impact older people but also the extent to which policy is equitable across generations and whether the chosen measures are likely to be effective in addressing the economic and social challenges of demographic change.
According to the Chancellor, Budget 2014 was a Budget for “makers” “doers” and “savers”.
Of particular interest were the announcements impacting those at the point of retirement – including abolishing the requirement to annuitise altogether.
People with small and large pots will be able to take-up drawdown products, annuitise or take their pension as a lump sum.
While removing ‘the effective requirement’ to take out an annuity will help some by providing additional flexibility, for many others, annuities help to reduce the risk of living in poverty towards the end of life.
It is therefore critical that those at retirement are able to access advice in order to make an informed decision.
The Budget also included measures to help older savers through a new savings bond for the over 65s, by increasing the limits on ISAs to £15,000 and by abolishing tax on small savings income.
These measures – and particularly the older peoples’ savings bond were suggestive of the fact that this was a budget for the Grey Vote.
Wouldn’t it be fairer if the bond was available to all age groups and not just those over 65?
Nevertheless, many of the reforms to savings are positive steps in the right direction, which should help to increase the number of people putting something away at the end of the month.
Yet these measures will only go so far given continuing economic pressures.
by Benjamin Franklin, Research Fellow, International Longevity Centre UK
