Saving for Later Life

Duncan Baker Excerpts

Tuesday 7th February 2023 Westminster Hall

[Duncan Baker (North Norfolk) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hosie. I congratulate the right hon. Member for East Ham (Sir Stephen Timms) on securing the debate. As the Member of Parliament for North Norfolk, I might be expected to speak in a pensions debate. I have said many times in the main Chamber that I represent the constituency with the oldest demographic in the entire country, with 33.4% of my constituents being over the age of 65. However, I am not actually going to talk about that cohort of people, because they have already retired. I am going to talk about an issue that has not been covered much today: giving people—mainly lower-paid people—useful guidance and advice before they retire.

There is a fundamental problem facing society and policyholders: most people tend to glaze over when they hear the word “pensions”. That became clear to me when I was a finance director of a medium-sized company that employed many people, so I can speak with a bit of authority about this. I found that auto-enrolment was a phenomenal success, as has been said many times. The reason is quite simple: we largely reduced the burden of instigating saving and took out the scare factor. Nevertheless, running that company’s pension scheme showed me first hand that if people can put off engaging with their pensions, they certainly will. That becomes a real problem.

The DWP published new research last week on savers’ engagement with their pensions. It said:

“Attitudes to pensions were characterised by detachment, fear, and complacency, which acted as barriers to engagement.”

I suspect that anybody who has been closely involved with pensions will not be surprised by that finding. There is a real problem. I am not talking about people who are well paid, but about the vast majority of the country. For people who are lower paid—perhaps working on a shop floor or in a supermarket—engaging with their pension and their retirement is a long way down their priority list. The reason is that people simply do not understand them, and we know that people often fear what they do not understand.

The Government should strain every sinew to ensure that good paths are put in front of people, rather than expecting savers to direct themselves to those paths for help and advice. There is help, but I suspect that if we asked the average person on the street, hardly anyone would know what the Pension Wise service is. Would they know that it is a Government-backed service that offers free, impartial guidance to over-50s? I doubt it. Would they know that someone can advise them about the options for their pension pot? Probably not. We should be promoting that service far more.

With that in mind, I was disappointed that the Government had a negative response to the recent auto-appointment proposal for Pension Wise appointments, as recommended by the Work and Pensions Committee. Pension Wise is popular and has had a positive impact on the relatively small proportion of savers who use it. User feedback is excellent and much better than policymakers might have reasonably hoped for prior to its introduction.

More importantly, Pension Wise has been proven to leave users better equipped to make pension decisions. That encompasses everything we have talked about. In his excellent speech, the right hon. Member for East Ham said that people are simply recognising that they do not have enough savings in the first place. We ought to ensure that we leave users better equipped to make pension decisions, with the additional benefit of raising awareness of the risks posed, for instance, by scammers. That alone seems like a reason to conduct a trial.

In recent research, the Financial Conduct Authority estimated that a quarter of consumers would consider accessing their pension savings earlier than they had planned due to the current cost of living pressures. We really need to get people to Pension Wise before scammers get to them and before the point where they make pension decisions based on a partial or even incorrect understanding of the consequences. That is the reason why Pension Wise was created; it is a key part of understanding pension freedoms. Indeed, its usefulness to savers presumably explains why the Government decided in 2015 to lower the age threshold for Pension Wise advice from 55 to 50.

Given the phenomenal success of auto-enrolment, about which we all agree, let us pursue auto-appointment to help give the right advice. To sum up, we should repeat that success; we should do what we did with auto-enrolment with auto-appointments, so that people realise there is friendly, decent, professional advice out there. That could take away the reticence, and perhaps sometimes fear, about taking financial advice about retirement. It can be done; we have seen it with auto-enrolment—let us repeat that success with auto-appointments.