Time for a long-term savings commission?

The government should set up an independent commission to consider policy suggestions for long-term savings and pensions, according to an open letter sent to politicians this week.

Nucleus Financial, an investment and retirement platform provider, has written to pensions minister Paul Maynard and Gill Furniss, Labour’s shadow pensions minister, calling for measures to ensure “a stable tax and policy environment”.

The letter is signed by Andrew Tully, technical services director at Nucleus, who said: “Setting up an independent long-term savings commission to depoliticise and develop proposals for pension and savings policy would bring much needed consistency and stability, which would deliver greater levels of trust and engagement.”

The letter cited automatic enrolment as an example of a policy with strong cross-party support that was first proposed by an independent commission. The Pensions Commission, led by Lord Adair Turner, first proposed auto-enrolment into workplace pension schemes in a 2005 report. The concept has since expanded UK pension coverage to 88% of eligible employees as of April 2021, according to the Office for National Statistics.

“While auto-enrolment has successfully created millions of new savers, it’s widely agreed that people are not saving anywhere near enough,” the Nucleus letter stated. “The complexity of retirement and tax planning involved in turning a pot of money into a retirement income can’t be overstated.”

A complicated landscape

The Nucleus letter follows the closure of the consultation on the government’s ‘lifetime provider’ proposal. Several respondents mentioned the potential positive impact of a long-term savings commission in the context of their consultation responses.

Renny Biggins, head of retirement at The Investing and Saving Alliance, told Pensions Expert that since the introduction of auto-enrolment there had been several significant policies introduced that had made the long-term savings landscape “complicated to navigate”.

“This is why TISA is calling for the creation of a new long-term savings commission,” Biggins said.

“Consumers must have the support of industry in properly evaluating the challenges that exist in saving for later life and the interaction between the various components which long-term savings comprise.

“[A commission] should work with industry and other relevant bodies to create a set of strategic consumer-based proposals aimed specifically at improving long-term savings outcomes.”

To be successful, he added, any commission needed to have a clear idea of targets, and therefore “must root itself in a principles-based cross-party consensus to remove any ambiguity and allow the commission to effectively deliver irrespective of the government in power”.

Meanwhile, in response to the ‘pots for life’ consultation that closed last week, Tom McPhail, director of public affairs at Edinburgh-based consultancy The Lang Cat, warned of “a real crisis coming down the tracks around the UK’s inadequate pension provision”.

He highlighted issues around small and forgotten pension pots, administration and tax, as well as a continuing lack of engagement and poor savings rates.

McPhail said: "The only realistic way we have a chance of avoiding disaster is to depoliticise the issues by setting up an independent long-term savings commission that can make recommendations that will enjoy cross-party support. We owe it to future generations to work together.”

PLSA response

While not explicitly supporting the idea of a long-term savings commission, Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), agreed that “a clear consensus and strategy for delivering good outcomes is essential for the financial futures of UK savers”.

He cited the PLSA’s 'Five Steps to Better Pensions’ proposal, published in October 2023, which highlighted five focus areas for the pensions industry and policymakers. These included measures to improve pension adequacy, engagement and coverage, and were aimed at building consensus within the industry.

“It's worth noting that there has been some valuable consensus across political parties for crucial reforms like auto-enrolment, the pensions dashboard, and other projects,” Peaple added.

“It is paramount that this collaborative momentum continues to shape and strengthen the future of the pension landscape, ensuring stability and positive outcomes for both current and future generations.”