Time to repurpose pensions through the cost-of-living crisis.


If you read one analysis of what the Bank of England was saying yesterday, I suggest it be this twitter thread.

What follows is the bad news that we had feared but hoped we would not hear.

I invite you to follow the thread independently but for those who want to know the likely outcomes they can be summarised as

  • Nine hundred thousand extra people out of work
  • Real household incomes fall by £2000 pa
  • Bank base rates reach 3% pa
  • Inflation reaches 13% in October (and the spike lasts longer)
  • Economy contracts for 6 consecutive quarters (more even than after the financial crisis)

Yesterday I complained about the unfortunate messaging from TPR which suggested that people should be discouraged from accessing their pensions early to pay household bills.

That was before Andrew Bailey finally came clean about the true state of the economy. Now I say it more forcefully, it is part of our consumer duty to ensure that no-one over the age of 55 is deprived of the ability to heat or eat, while they have available savings in their pension pot.

It is not good enough for the Pensions Regulator to hold some thin blue line on “workplace savings”. It must recognise that for a substantial part of those 10m new savers into auto-enrolment , what has been saved is little more than rainy day money that can tide over those whose incomes have fallen or possibly collapsed till the state pension/ pension credit arrives.

Aviva have recently seen an unprecedented demand in its Retirement Call Centre. This includes a  32% increase in full encashment and a 38% increase in access requests via flexible access drawdown, it says it has the evidence that people are feeling the need to use their pension money.

Clearly accessing it now means it won’t be there to spend in later life, but immediate needs are pressing, and will be more so come the autumn. – Emma Douglas

We should stop kidding ourselves that retaining savings in pension pots is automatically a good thing.  I certainly wouldn’t expect to be labelled a scammer if I help someone my age (60) or younger, to drawdown income to pay their “household bills”.

It is now time that those organisations who have the majority of the small pots (Smart Pensions, NOW pensions, Nest, Cushon and People’s Pension) , considered a co-ordinated strategy that helped their financially vulnerable customers understand the key issues they face

  1. The mechanics of accessing their pot – many people are frightened to access their money for fear of  reprimand and wilful obstruction
  2. The tax implications of drawing down all or part of their pot
  3. The pathways for drawdown – including the pathway to immediate withdrawal
  4. The interaction of pension savings on universal and pension credit

I fear that most call centres are not currently geared to providing this kind of support. Indeed I am not sure Pension Wise is either. Money Helper has debt counselling as part of its function but what is needed is a co-ordination of debt counselling and guidance on how to use savings.

I hope that the PLSA will now start turn its thoughts to how the pension schemes it represents can better help savers meet their cost of living crisis. The current agenda for the two day annual conference in Liverpool is long on drinks receptions and sessions on making pension “sexier” but short on focus on the real issues of many millions of the members its schemes represent. By the time this Conference happens in October, inflation is forecast to be 13% and fuel bills will be hitting mats that will require money from somewhere.

Similarly, it is time the ABI actively considered how the support services of the insurers it represents, can be repurposed to the immediate needs of those savers whose immediate task will be to make ends meet.

But above all , we need the Pensions Regulator and FCA to recognise that pensions are a way of meeting the household bills that are worrying millions of savers. The statement in TPR’s recent press release on “pension scamming” is not just confusing but outright nonsense.

TPR is warning that savers may be lured by offers to access their pension savings early to cover essential household bills

Pension liberation for those under 55 is now almost impossible. It can only happen through fraud and the flags on transfers to any non-standard pension that might be used for liberation are deep red.

But liberating savings for those who are 55 or over and have bills that they have no way of meeting otherwise, is not fraud. The knowledge that there is a pot, no matter how small, that can be drawn on to pay the bills and meet the unexpected expense of a parking ticket or a broken boiler or an unexpected journey that must be taken, is immense.

We need to be writing to all policyholders and scheme members over the age of 55, explaining to them how they can access their pot. We must also accept that for some DB members, early retirement- and access to the commutated cash-sum , may become a financial necessity over the next three years.

Yesterday’s BOE statement was a wake up call for me. I hope it is a wake up call for others. The situation reminds me of how we were in the early months of 2020 when we could see the horror of the pandemic approaching but were simply in denial – till lockdown came.

Many pension support services fell over in the second quarter of 2020, for lack of preparedness. Please God we do not fail our consumers over this crisis , again.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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8 Responses to Time to repurpose pensions through the cost-of-living crisis.

  1. I agree but we need a coordinated and multi-faceted approach.

    Maximising income, to make sure that the help that people are entitled to is being claimed. That’s well over £16bn a year on government estimates. That doesn’t include benefits for disabled people, where probably over half goes unclaied; and they’re likely to be worst hit.

    Raising awareness of other help. There are schemes run by utilities, health bodies, transport services and local authorities to reduce expenditure, where awareness is really low.

    Grant help that’s available from thousands of grant giving bodies. Often limited to people who live in a particular area, were (or are) in a particular kind of work or have a specific health condition. Turn2Us has a grants finder on their website that can help.

    The first step is raising awareness of those who are in touch with people who need financial help. They can act as a bridge between those in need and the help available. Ferret are delivering a program, called Dangos, for Welsh Government to raise awareness of frontline workers in Wales so that they can signpost the people they meet to available help. It works. The outcomes show it making a difference. That’s open to people working in financial services in Wales, who meet those in need as part of their day to day work. Soemthing similar across the rest of the UK would help there.

  2. henry tapper says:

    Who leads such an approach Gareth?

    • Should be a government drive. It’s happening in Wales and Scotland but, judging from the current contest, the next Westminster administration seems to want to give money to the already better-off rather than those in need.

  3. ros altmann says:

    I feel I need to comment here Henry, because on this one I have serious concerns about your approach and your criticisms of the Pensions Regulator. Do you know how many of those who have money in pensions now
    a) have no savings,
    b) have maxed out credit cards
    c) have no access to other help or support to tide them over a difficult period
    d) can’t afford heating or food AND
    e) are over age 55?

    I believe it will be a small subset of those people that you and I are really concerned about, those who have nowhere else to turn and face penury in hunger and cold. If they are over 55, and have pensions, they might still be better off with other types of help for the moment.
    Pensions are precious – they have huge advantages that are designed to help people over a lifetime and tax relief is not given to fund people in their 50s and 60s – pensions are needed for much later life too. It does worry me that people are too focussed on taking money out when still relatively young. Of course a few people can benefit by using their pensions and paying 20% tax on their withdrawals (ok more like15% after TFC) but the vast majority should not be looking to touch their pensions if they have other ways of supporting themselves through this crisis. The Pensions Regulator is right, in my view, to point this out and I would be really nervous about any public programme or pressure that urges people to spend their pensions, rather than keep them if they possibly can. Even those who are out of work may be back in work in future and might be auto-enrolled in future, but once the many years of pension contributions plus tax relief (and some employer contributions) are lost, they are gone. They are long-term spending money and those who are under 55 cannot access their pensions anyway, so whatever is put in place to help them can apply to older people too, rather than draining pensions unless absolutely vital.

    • Are you really suggesting that, at a time when interest rates are going to rise substantially, people should “max out” their credit cards without, quite possibly, any way to afford to repay or even service the interest?

  4. henry tapper says:

    You talk of pensions as “long-term spending money” Ros. But the evidence from the IFS is that there is more poverty in the under 67s than the over 67s, partly because of the improvements in the state pension and partly because pension credit is better than universal credit.

    I don’t think that we can really call a pot – a pension, it’s just a capital reservoir and – as Gareth Morgan attests, may be more effectively used early than late – especially where there is little other income from work or investments

    So the Pension Regulator’s strong statement that people who encourage early encashment are akin to scammers is not one I agree with.

    Funnily enough, I am in receipt of a “bridging pension” which falls away when I get to 67, I don’t see anything wrong with that concept.

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