‘Pot for life? Don’t hold your breath’

Mark Futcher, Partner and Head of DC at independent consultancy Barnett Waddingham, comments: “We now have a bit more clarity on the so-called ‘pot for life’, which will – according to the Chancellor –contribute towards the Government’s ambition to give the average new saver an extra £1,000 a year in retirement. The proposed consultation is in fact for a ‘stapling’ model, with new employees asking their employer to pay into their existing pot.

“Stapling can be done in a number of ways, but essentially it risks members keeping their first pension pot for the rest of their life. How that first pot is decided is up for debate – would any authorised master trust be allowed? Would there be increased regulatory requirements on value for members? Will employers have a responsibility to mirror the existing transfer rules to mitigate the risk of harm to their staff? Even once established, we risk an administrative nightmare without a robust central clearing house.

“As for improving people’s pot at retirement, it’s hard to see how this would help. Staying in the same pot means savers risk delays to investment decisions, poorer products, a lack of employer governance, and higher fees, as individual employees will always get a worse deal than large firms. What’s more, if we see more individual retail policies and less consolidation, the Mansion House proposals to use scheme funds to invest in the UK become even more difficult to implement.

“A consultation brings with it no certainty of change, but even if the consultation results in a positive outcome, making this work would easily take a decade. It has taken almost that long for the Government to fail to deliver a pensions dashboard – I won’t be waiting with bated breath for this reform to come to pass.”

Brian Byrnes, Head of Personal Finance at Moneybox comments: “While today’s updates to simplify ISAs may not be the silver bullet needed to drive a step-change in investing culture in the UK, it is a step in the right direction. Contributing to multiple ISAs of the same type will allow savers to take advantage of the rates currently available on the market and encourage providers to further build on the success of ISAs which will ultimately help encourage positive saving and investing behaviours in younger generations. We will continue to engage with the government, Treasury and HMRC to build on today’s proposals.

“The proposal to allow investment in fractional shares within an ISA is also welcome news. For too long, the investing industry was built to serve the wealthy. Fractional shares, which require a lower amount to participate, help ensure that investing remains available to all, democratising the world of investment and an important, positive step forward for more people.”

Brian Byrnes, Head of Personal Finance at Moneybox comments: “No matter the path your career takes, being mindful of how much you’re setting aside for retirement should be a constant. We know the vast majority of people are not saving enough for their ideal retirement and the complexity of our current pension system has proven to be a barrier to engagement. Therefore it’s encouraging to see the government is looking to address this by consulting on a pension pot for life. We believe this could empower more people to actively start planning for retirement earlier in life and increase engagement with our personal pension savings will result in people accumulating more wealth for their retirement. While there are complexities in the “pot for life” model, we would encourage the government and DWP to conduct this consultation at pace in order to provide retirement savers more choice with their pensions, sooner rather than later”

Brian Byrnes, Head of Personal Finance at Moneybox comments: “As the largest provider of Lifetime ISAs in the UK, supporting a community of more than 500k aspiring first-time buyers the length and breadth of the country, we are extremely disappointed that in a budget for growth that is designed to reward effort, so little has been done to support the next generation of home-buyers.

There can be no doubt that it has become increasingly difficult to get on the property ladder and with sustained economic challenges and mortgage market uncertainty, support is evidently needed.

Saving for a deposit remains one of the biggest hurdles many face on the journey to buying a home and that is why the Lifetime ISA is such a lifeline to so many.  Whilst we welcome measures announced today to increase housing supply and extend the Mortgage Guarantee Scheme, the Chancellor’s decision not to review the Lifetime ISA product rules is a missed opportunity to reassure FTBs and provide much-needed near-term tangible financial benefits.

While 90% of Moneybox Lifetime ISA customers who’ve bought their first home, paid less than £404k, we recognise that if the price cap had risen in line with house prices since its introduction in 2017 it would stand at £560k.

Despite changing market conditions, LISA product rules have not been reviewed since the product was launched in 2017. And so, we will continue to work closely with policymakers in the coming months, campaigning to ensure Lifetime ISA product rules are reviewed and the product continues to be fit for purpose for all those who need it most, into the future.”

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said: “It was good that the Chancellor’s statement included a focus on the savings market. Modernising rules and regulations around savings products is a necessity as economic conditions change, so announcing reforms was a must after years of rampant inflation and a devastating cost-of-living crisis.

“The Chancellor’s wider emphasis on putting more money in people’s pockets through wage increases and tax cuts bodes well for people’s finances, but overlooking their ability to save effectively would have been a grave omission. With some saving providers offering inflation-beating rates, now is the time for action – not only by the government, but also by consumers, on whom the onus remains to make savvy financial decisions.

“Many banks are still failing to pass better rates onto customers, so it is up to savers to shop around for the best products and providers that can enable them to meet their long-term financial goals.”