A group of MPs investigating people’s ability to cope with financial difficulties and save for their future is calling for the Government to address inadequate pension savings for the self-employed and do more to support single parents into the workplace.
In its first report, ‘Saving, Spending, Surviving: a holistic view of people’s financial resilience during the pandemic’, the All-Party Parliamentary Group (APPG) on Financial Resilience is warning that the self-employed are falling through the cracks when it comes to pension savings. In its evidence sessions, it heard that just 22.3% of self-employed people have adequate pensions, and 32% do not save for their retirement at all.
To tackle the issue, the APPG is recommending that an equivalent of automatic enrolment be introduced for the self-employed, to bring them into pensions savings through the tax system.
With almost half of all children in lone-parent families living in relative poverty, the APPG is also calling for the Government to do more to ensure single parents are financially stable.
It is recommending that a review of the 15 and 30 hour marks of free childcare support be carried out.
If this is enhanced to include more hours it would significantly help single parents to be part of the workforce. This additional support provides single parents with greater flexibility to find work that fits around their childcare responsibilities and protects against the costs of childcare.
Greater access to flexible work arrangements can be crucial to building financial resilience across society.
The APPG, building on work by the APPG for Women and Work on fair recruitment, has called on the Government to produce a guide for employers on how to support flexible working, and launch a consultation on mandating that all job advertisements clearly state whether flexible working options are available.
The APPG is also highlighting the need for flexible savings products, recommending that the Government works with the financial services industry to develop ways for people to set aside money for a rainy day.
This could build on NEST’s Sidecar Savings project, which is currently running a trial on employers setting aside a portion of employees’ wages to help them build up emergency savings, which can be accessed whenever required.
Co-Chair, Tonia Antoniazzi MP: “This report is a long-overdue account of how fragile personal finances can quickly turn into a disintegration in living standards, mental wellbeing, and future prospects. When we planned the inquiry last summer, we did not anticipate that a cost-of-living crisis so deep would emerge as we concluded our sessions.
“However, the pandemic can serve as a test-case for what can be done to help those across society cope with extreme financial pressures, both in terms of income and expenditure.
“For that reason, the recommendations we make here are even more pertinent to policymaking as those pressures continue to build.”
Co-Chair, Shaun Bailey MP: “In the past there has been a focus on how to lift people out of difficult financial situations, but little has been done to understand why people end up there. What this report does is uncovers just how close large groups of the population are to experiencing a crisis in their personal finances.
“It is particularly important in revealing that those who we may commonly define as ‘comfortable’ or ‘middle-class’ can be one negative life event away from struggling to meet essential costs.
“Our report explores the root causes of the great polarisation that exists in the saving and spending capabilities of those across the income spectrum and makes recommendations to target support for the hardest hit groups.”
The full list of recommendations made by the Financial Resilience APPG:
- The Government should work with the financial services industry to enable the development of flexible savings products for those who may need access to a rainy-day fund but still want to save for later life.
- Alongside this, the Government should coordinate an approach to improving pension saving in under pensioned groups. This should involve an equivalent of automatically enrolling the self-employed into saving through the tax system.
- To enable more people to develop good, stable incomes, the Government should work to improve the availability of quality flexible working jobs.
- The Government should introduce policies to improve the resilience of single parents. This should involve a review of the 15 and 30-hour marks of childcare support, as changes here would have the biggest impact in allowing single parents to be part of the workforce.
- Given the low levels of financial education and engagement in the UK, the Government should work closely with existing avenues of guidance as a step to improving public awareness of finances. Take-up of Government services such as MoneyHelper and Pension Wise should be improved, and expert non-profits should be worked with as consultants or providers of financial guidance.
- The Government should work with employers to improve the ways they communicate financial information to their employees.
- We encourage the Government to support an independent review into the rate and design of Statutory Sick Pay to ensure that people are not choosing between their financial resilience and protecting others.
- While too broad an issue to suggest just one policy, this group finds that the Government should review the social security safety net to ensure the system helps people out of poverty rather than trapping them in it. The spending power of individuals is the core of their financial resilience.
Reaction
Stephen Lowe, group communications director at Just Group:
“The pandemic not only upturned people’s lives but has exploded the idea that people can be more relaxed about the future because automatic enrolment into pensions and the ‘pension freedom and choice’ policy means we can look forward to a comfortable old age. As the report highlights, financial problems increase the risk people will be unprepared for retirement and currently less than 40% of working aged households are on track to achieve an adequate retirement income.
“We are pleased to see the APPG calling for measures to address the low levels of financial education and engagement, and in particular its support for a trial of automatically booking Pension Wise appointments to find a way of addressing persistently low usage levels.
“These free, independent and impartial guidance sessions for pension savers aged 50+ are a key consumer protection measure against poor pensions decisions and scams.”
