The Government is stuck between a rock and a hard place as it attempts to reconcile the need to grow the economy whilst also encouraging long term savings.
Economic Insight by the International Longevity Centre published following the Autumn Statement, paints a bleak picture for future pensioners. ILC-UK analysis reveals that:
- By 2022, economic output per person will be over 25% smaller than we would have expected it to be before the crisis. This economic weakness has impacted on household finances.
- Real wages will be £11,600 (or 31%) below what we would have expected them to be before the crisis. This has made it harder to save.
- Bank Rate is expected to remain firmly in the zero lower bound, while returns on long dated government bonds are likely to remain at historically low levels. This means savings will not go as far.
- The household savings ratio has been falling and is expected to remain low up to 2022. This is despite the continued roll out of automatic enrolment.
Ben Franklin, Head of Economics at ILC-UK said:
“The picture painted by the Autumn statement is bad economic news for savers, but this does not mean the Government should shy away from its long run objective of supporting private savings through automatic enrolment. Government needs to think carefully about how to square the circle and deliver increased savings alongside economic growth.”
ILC-UK Economic Insight “Autumn Statement 2016: What does it all mean for UK savings?” has been published on the ILC-UK website at http://www.ilcuk.org.uk/index.
The ILC-UK Economic Insight has been supported by the ILC-UK Partners Programme. Members of ILC-UK Partners Programme include Anchor; Audley; Aviva; Centre for Ageing Better; Equiniti; EY; FirstPort; Hymans Robertson; Legal & General; Newcastle University Institute for Ageing; Partnership; Prudential.