Household finances: income, saving and debt
In our response to the Treasury Committee's inquiry, we look at the the savings policy interventions of Help to Save and auto enrolment, and suggest some changes that could be made to improve the schemes from a low-income worker's perspective. We also highlight a real-life drawdown disaster – one of many that have no doubt occurred since the changes that took effect from 6 April 2015 allowing greater choice over how an individual might access their pension savings.
We thought we could usefully comment on a number of the Terms of Reference:
- What policies could support households in achieving appropriate levels of saving in cash and pensions? Are current policy interventions (e.g. ISAs) well targeted?
- What actions can government take to improve levels of financial awareness and education, and what lessons can be learned in designing the successor to the Money Advice Service?
- Are retiring households receiving adequate and appropriate financial advice following the implementation of pension freedoms?
- What is the scale of and trend in problematic debt and over-indebted households? To what extent is unmanageable debt being manifest in non-credit defaults (e.g. on utilities bills or council tax)?
- Have household incomes become more variable as a result of more flexible labour markets and the “gig economy”, and does this raise the need for new credit products?
- What are financial regulators doing to monitor the issues of problematic debt? Has the UK financial services market been effective in providing suitable credit products for low income households? What interventions can the Government make, including “breathing space” schemes?
Our submission can be found here: Household finances: income, saving and debt – LITRG response