Leading professionals from the Tax Incentivised Savings Association (TISA), which includes industry giants BlackRock, Old Mutual Wealth and Hargreaves Lansdown, presented a proposal for a new savings and investment policy during a roundtable in London.
The Savings and Investment Policy (TISP) project aims to address the current savings crisis and prevent the UK from reaching a “tipping point” in 2035 when it is estimated a large proportion of the population will be significantly worse off than their parents.
This “looming savings crisis” was underlined in a report which found 30% of UK householders have less than £250 in savings, and 19% of people who were not saving at all. TISP research also found nearly half of those aged between 18 to 24 said they would save more if the process was made easier.
One of the policy recommendations is for the adoption of “nudge techniques” to increase pension contributions. Although TISA’s report said the auto-enrolment contribution of 8% of salary – which is to be introduced next year – was “a good start”, it said this was insufficient at delivering an adequate retirement income, and should in fact be closer to 14%.
“Culture of debt”
Another recommendation was for the introduction of a savings minister who would be part of central government and increase consumer saving.
“This would not be an increase in bureaucracy, but a way of streamlining the current system,” said project chair and head of UK retail at BlackRock, Tony Stenning. “We need to depoliticize the savings regime and rebuild trust in the industry.
“A new minister would be an advocate for savings, steering people away from the culture of debt.”
“Break down barriers”
The development of an industry-led digital passport was also high on the agenda, with TISA’s director general David Dalton-Brown claiming it would “break down barriers” by allowing savers to easily open accounts and transfer their savings between providers and products.
The TSIP project group is currently considering ways to harness technology for the passport, inviting providers, technology companies and regulators to contribute their ideas in the hope it will be rolled out in 2016-17.
“Simple compelling incentive”
An overhaul of the pension tax relief system was also recommended by TISA members, which suggested the government present tax relief by matching each pension-holder’s contribution to pension schemes.
According to Tom McPhail, head of research at Hargreaves Lansdown, this would “reward people for participating and give them a simple compelling incentive to save”.
Speaking about the guidance guarantee ahead of the introduction of April’s pension freedoms, consumer director at Old Mutual’s savings division, Carlton Hood, said many people don’t trust financial services to do the right thing.
“There is a trust gap we need to bridge,” he said. “At the moment we don’t want to give guidance because we don’t want it to be construed as individual advice, so we need a clear pathway to the purchasing of advice, rather than just vague principles.
“Consumers are confused,” Hood added. “The headlines are there but the details are not. Even we as industry professionals are confused. We need to develop boundaries for what is advice and not advice.”
