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An All-Party Parliamentary Group report outlines ways to increase people’s financial resilience, from auto-enrollment schemes for the self employed to flexible savings products.
The Government should improve pension saving in groups such as the self-employed by extending auto-enrollment to them through the tax system, according to a new report from the All-Party Parliamentary Group on Financial Resilience.
The report says that alongside this, the Government should also 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. Calling this a ‘sidecar savings’ project, the report says this would automatically make deductions from pay similar to automatic enrolment with pensions and would enable people to save for emergencies. The report says it would act as a behavioural tool in helping people save, “reducing the vast complexity and noise that they could otherwise face”.
The report recognises that due to the cost of living crisis “there is a real danger that individuals and families could look to make savings in their household budget by decreasing pension contributions”. While the decision seems to make sense, it is very likely to leave them poorer in old age. The inquiry heard that the financial shock that many people have felt in the pandemic “will be nothing compared to the shock they will feel upon retirement”.
The Financial Resilience APPG was set up during the Covid-19 pandemic to look at the pressures on househodl finances. Its Saving, Spending Surviving report also recommends that the Government should work to improve the availability of quality flexible working jobs and develop policies to improve the resilience of single parents. The latter should involve a review of the 15 and 30-hour marks of childcare support which prevent many single parents working more hours.
Other recommendations cover the need for greater financial education, with employers playing a key role in spreading this. Working in partnership with non-profits, the report says the Government should look to increase take-up of free services such as MoneyHelper and Pension Wise.
There is also a call for 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” and an overall review of the social security safety net “to ensure the system helps people out of poverty rather than trapping them in it”.