Savings

The last decade has seen considerable change to the pensions environment. This event included a keynote talk from the Minister for Pensions and Financial Inclusion, a presentation on a programme of IFS research in this area over the last two years, and an expert panel discussion of the implications of the research.

People on middle and higher incomes need to save privately for retirement, but deciding when and how much to save is difficult. One particular trade-off people face is how much to save in a pension and how much to save for, or spend on, owner occupied housing. In new research published today we examine interactions between housing and and pension saving at two distinct stages of life.

The measures taken to help reduce the spread of COVID-19, resulting from both policy and consumers’ changes in behaviour, have had major impacts on consumer spending patterns. In this briefing note, we explore how consumer spending has evolved, both during lockdown and in the recovery phase since.

The proportion of the self-employed saving in a private pension has declined dramatically over the past two decades, leading to continued concerns about their financial preparations for retirement. At this event we presented the findings of new IFS research that has examined this trend.

From tomorrow, for the first time in over a decade, the point at which people can claim a state pension (the “state pension age”) is simple. If you have reached your 66th birthday, you can claim it. Otherwise you cannot. For women, the state pension age (SPA) has risen from 60 in March 2010, reaching 65 two years ago in October 2018. From then on the state pension age rose for both men and women, to reach age 66 tomorrow.

Recent decades have seen rising wealth-to-income ratios. In England, increases in wealth have been concentrated among older generations. Those born in the 1980s have accumulated no more wealth than those born in the 1970s had done by the same age, but the parents of those born in the 1980s hold 40% more wealth than the parents of those born in the 1970s held at the same age. One consequence is that inherited wealth is on course to be a much more important determinant of lifetime resources for today’s young than it was for previous generations. New work by IFS researchers, funded by the Nuffield Foundation and released today, estimates that the average (median) inheritance of the 1960s generation will be worth 8% of average lifetime earnings for that generation, rising to 14% of lifetime earnings for the 1980s-born generation.

This report examines how living standards – most commonly measured by households’ incomes – were changing in the UK up to approximately the eve of the current COVID-19 crisis, using the latest official household income data covering years up to 2018–19.

Automatic enrolment has been hugely successful, such that over 90% of eligible private sector workers are now members of workplace pension schemes.

The fall in stock markets has reduced the wealth of those who directly hold shares and of those with defined contribution pension pots that are invested in equities.

UK households hold around £230bn of unsecured or consumer debt – including loans, credit card debt, hire purchase agreements and overdrafts. This equates to an average £8,000 per household. The bulk of that debt is held by those on relatively high incomes and in normal times its repayment tends not to cause financial difficulties. But in a minority of cases, debts can put stress on households’ budgets with consequences for living standards and mental health.

This presentation was given at the launch of two reports into recent pension reforms, on retirement savings expectations and on automatic enrolment.