By the time you are reading this The Heath Report Two will have been released. I will not attempt to précis 13,000 words in 400, but there is one recommendation which would be worth exercising here.
THR2 has recommended the establishment of a Royal Commission to decide how much the citizen can rely on government provision if no private provision is made. The coalition government has established a new principle that it must always pay to work. This needs to be extended over a wide range of other government benefits, not least long-term care.
High earners spend most of their lives avoiding the state and seek financial advice to improve their independence. What they get from the state may be interesting, but hardly central to their financial planning.
Similarly, THR2 identified 17m of our fellow citizens who have not accessed financial advice. Many of these are heavily dependent on the state, either as employees or beneficiaries. Some may pay tax but most are net beneficiaries from the public purse.
The final group contains 15m and they are less state-dependent but do not have the income to be blasé about what the state has to offer. Similarly, their adviser needs to take the state’s involvement into account. Currently, advisers tend to presume that the client’s current entitlement will be there when needed. But will it?
Those of us who thought we were investing our national insurance to retire at 65 have had a nasty surprise. Just imagine the howls of anguish if the financial services sector had unilaterally changed the retirement age as government did.
The government was surprised at the low take-up of stakeholder pensions, but why invest relatively small amounts of money which exclude you from means-tested state benefits? Why save yourself into penury?
Since the Labour government of Clement Atlee (prime minister, 1945-1951) there has been a continuous battle between those politicians who believe that the state should be the first port of call for all provision and those politicians who look at the state as the place of last resort. Are you an individual or part of the collective?
If private provision is to be made it will have to last over most of the life of the individual and therefore cannot be exposed to political fashion. If we are to fill the saving and protection gap, the public needs the certainty that saving pays. We need a Royal Commission now.
Garry Heath is the editor of the Heath Report
