Last week’s election result has been received positively by many investors, not least because of the stability of having a majority government.
The Conservative manifesto vows to provide a 2.5 per cent annual rise in the state pension, 30 hours a week of free childcare and a ‘help to buy’ ISA scheme for first-time home buyers.
However, there’s always the view that more can be done to encourage saving and investment. The investment world has been forthcoming in its suggestions for what the new government should focus on.
In light of this, FE Trustnet explores three financial experts’ top manifesto policies that they believe would create a culture that makes saving more attractive.
Address the inter-generational financial imbalances
Paul Emerton (pictured), head of UK stewardship and governance at Old Mutual Global Investors, said: “We would like to encourage the new government to think about the unfair treatment of younger generations.” 
While he admits this doesn’t apply to every member of each generation, Emerton points out that ‘baby-boomers’ witnessed house price increases over decades, which have essentially resulted in a new generation of renters who are struggling to get their foot on the bottom rung of the housing ladder.
A contributing factor to this, according to Emerton, is the increasingly hefty loans that students have to pay back, which now include living expenses and tuition fees.
Another issue that younger generations now face, he added, is that today’s workers have defined contribution pension schemes as opposed to defined benefit pensions, which in most cases paid a 60th of employees’ final salary for each year they worked.
“Now the majority have defined contribution pension schemes, the amount contributed by employers in the private sector is significantly below the level in a defined benefit pension, and the sum available at retirement is worth far less than the old defined benefit schemes,” he explained.
Emerton believes this has led to the “pay-as-you-go” state pension becoming more favourable, which involves the working generation having to contribute towards pensions for those who have already retired.
“The baby boomers had fewer old people to pay for and they died earlier,” he continued.
“The generation paying for the baby boomers have a far greater number of pensioners to support for longer, with a triple-locked pension increase guaranteed. It is the younger generation that pays.”
“For investors, this generational divide undermines the future customer base and a key resource of any company – its people.”
Adapt the pension scheme so savers can adequately fund their retirement
Following the appointment of Ros Altmann as the new pensions minister, NOW: Pension’s Morten Nilsson is calling for a number of issues to feature on her “to-do list”.
Firstly, he believes that it’s important to make sure those on lower wages can still benefit from auto-enrolment, which was introduced as part of the UK’s 2012 pension reform.
“By restricting auto-enrolment to those earning at least £10,000, the rules exclude millions of low paid workers, particularly women,” Nilsson argued.
“The trigger for being included in auto-enrolment should instead be linked to the threshold for National Insurance contributions lower earnings limit, which is currently £5,824.”
Linked in with this, the CEO believes those who are struggling for money, particularly younger generations, should be allowed to tap into their pension pot when they need to.
He said: “The nature of pension saving is fundamentally changing. With over 55s being afforded greater flexibility with how they access their pension pot at retirement, perhaps now is the time to consider extending flexibility to young savers to help incentivise saving.”
“In New Zealand for example, the government’s KiwiSaver workplace pension saving programme allows savers to make withdrawals to help fund a deposit for their first home or if they are seriously ill or suffering significant financial hardship.”
Nilsson referred to research conducted by Consensuswide, which polled 2,002 UK respondents between the ages of 18 and 35 and reveals that 58 per cent of those questioned aren’t currently saving into a workplace pension. However, 54 per cent would start saving if they could access some of the money to help fund a deposit for their first home.
Like Emerton, Nilsson also believes that auto-escalation needs to be re-considered as an 8 per cent contribution from companies is not enough to achieve a comfortable retirement.
“The Pensions Institute, an independent part of Cass Business School, argues the best way to increase contributions to 12 to 15 per cent is through auto-escalation, which sees employees nudged into diverting annual pay increases into their pension plan,” he added.
Extend financial education in schools
In an article last month, financial education in schools was called for by a panel of financial experts including Steel Asset Management’s Alan Steel, M&G’s Steven Andrew and Chelsea’s Darius McDermott, who referred to the financial illiteracy in this country as “staggering”.
As part of its saver’s manifesto, Brewin Dolphin also says it is now more important than ever when considering the huge financial challenges that the current generation will have to face.
“It is clear that the relatively paternalistic approach that helped previous generations to provide for themselves financially, for example, via final salary pension schemes, is steadily disappearing: instead, future generations of people are going to have to be much more self-reliant and do much more to provide for themselves,” the wealth manager said.
“But, just as we are asking young people to become more self-reliant, an ‘advice gap’ is opening up, making access for many less well-off people to high-quality financial advice limited or even non-existent.”
Brewin Dolphin refers to research from the Money Advice Service released in March, which found that out of 2,000 UK parents with children aged 11 to 18 years old, 57 per cent agree that parents are the biggest influence on the development of children’s money skills.
In spite of this, the report also found that more than half of parents find it difficult to talk to their children about money matters.
Brewin Dolphin said: “Given the current shortage of personal financial education in schools, it is hardly surprising that – for good or ill – children tend to follow the financial habits of their parents, as research from the Money Advice Service shows.”
“The need for better information and a wider understanding of basic concepts is obvious. If future generations of young people are going to prosper, the education system has to do more to equip them with the information and understanding that they will need in order to take sensible decisions and avoid obvious pitfalls.”
The investment management company believes that this should involve teaching the differences between debt and equity, how basic financial products work and the long-term ability of compounding to generate earnings.
“It is vital to realise that financial services is a very large and economically important section of the UK economy and that providing better financial education will also help young people to enter an industry that provides good quality jobs and financial security for millions of British employees,” it added.