Saving for Later Life

Debate between Nigel Mills and Margaret Ferrier

Tuesday 7th February 2023 Westminster Hall

[Nigel Mills]

Yes, the hon. Gentleman is right that we need people to understand if they have gaps in their state pension record. That can be found relatively straightforwardly on the state pension system. The dashboard will need to show the state pension entitlement. I urge ladies who might be in that situation to check, because they ought to have got credits while they were receiving child benefit. They might not have been working, but they had other caring responsibilities. It is always worth checking whether they have entitlements of which they may not be aware, and which the system has not picked up.

Back to my theme on the dashboard: for the dashboard to have the impact we want—for people to change their saving behaviour—the information needs to be there. It needs to say, “Yes, you have saved this amount, but most people by your age have saved this amount. If you want to have £10 grand of extra income in retirement over your state pension, you are not on track to do that, and you need to increase your saving.” We need to find a way to give people a context for their savings information. Otherwise, we will have a meaningless number that might not drive behaviour. It might even perversely make people think they are better off than they are.

It is important to understand what the Government and the regulators will allow to be shown and want to be shown. We must ensure that the data is objective, fair, accurate and preferably consistent, because we do not want people to get slightly different pension target across six schemes; they should be told the same information so they can make an accurate comparison.

The second area is the thorny issue of access to guidance and when people should have it. The Work and Pensions Committee has argued with the Government and the regulator about that for a few years. I hope the noises coming out of the Government about trying to get people who are not in economic activity back into work, and about wanting to do more than a midlife MOT or a financial review, mean that they are moving our way now, but the take-up of Pension Wise has been far lower than everybody wanted it to be. The Minister at the time said that Pension Wise take-up should be the norm. I am not sure how 8% or 14% take-up could be described as the norm; I would have thought that the norm would be just below half, or something. Perhaps the Minister can tell us what she thinks the norm is in that context.

There is no room for doubt: even with the stronger nudge that the Money and Pensions Service is trialling, Pension Wise will not get anywhere near that take-up. It is absolutely right that people should have access to that service when they are about to do something with their pension pot. It is a decision that they will not be able to change for the rest of their life, and if they get it wrong, it could be disastrous. Equally, given that we have so much unused take-up, can we not find a way of getting people to access the scheme earlier, soon after their 50s? That would allow them to get a proper review for half an hour or an hour and have all these things explained to them, so they can see what their situation is while they still have a chance to change it, rather than when it is too late? I am old enough to remember “Bullseye”—at the end of the show they used to say, “Here’s what you could have won.” Having a pension review at the age of 65 and a half that says, “Here’s what you could have had if you had saved a bit more,” is not all that helpful to people, so they should get that intervention earlier.

I was a little disappointed by the Government’s response to the Work and Pensions Committee. They said they did not want to go forward with a trial of auto-enrolling people into a Pension Wise appointment shortly after their 50th birthday. I understand that some pension schemes are willing to put their members forward in some sensible, random way so we can find out whether that works. All we are asking the Government to do is to allow MaPS and regulators to commission one of those trials so that we can see whether enrolling people into an appointment in their early 50s gets positive feedback and changes their behaviour. If it does not work, fine—we will have to find some other way—but it looks to be a low-cost way of seeing whether an intervention might work. It would use capacity that is already there and is not being taken up, and it would be a powerful way forward.

I hope that the Minister will be a bit more supportive than her predecessor. If we want to work out how to give people some kind of nudge, hint or push at an age when they can make a change, that is the best idea out there. If the Government are looking for ideas to get people in that age bracket to come back into work, because they have not saved enough for retirement but they think they have, a half-hour or hour session with an expert who can explain what they really need and what they have really got may be the best way of doing it. The online midlife MOT that the Government have produced contains some very useful information—I am not saying it is a bad thing—but it will not change behaviour. It is not an intervention that will really make a difference.

[Margaret Ferrier]

The Social Market Foundation found that just 25% of people from ethnic minority backgrounds have a workplace pension, and research found that they are more likely to be sceptical about private pensions. Does the hon. Gentleman agree that the Government should do more to educate and reach those groups so they can make sure of their post-retirement financial security?

[Nigel Mills]

The hon. Lady is absolutely right. It is important to explain to people not just from that background, but from all backgrounds, that pensions are a good thing, safe and a good way of saving for retirement. People just do not understand pensions, and they are quite cynical and sceptical about the idea that their money will be there. The more we can do to reassure them, the better.

I have two more quick points to make. We have wrestled for years with the conflict for younger people: should they save for a deposit to get on the housing ladder, or should they save for a pension? The pension industry screams if it is suggested that the former is possibly a good idea. There have been various ideas about how to link the two, but we have not yet made any progress on which one to go for. A key determinant of someone’s financial health in retirement is whether they own a house. If they do, they do not have housing costs to pay and they have an asset that they may be able to downsize to boost their pension pot, so getting young people on the housing ladder earlier is good for their retirement just as saving for a pension is good for their retirement.