Matthew Connell examines the effect of the recent Budget on the advice market and wider economy
It is great to be preparing for a more normal Christmas this year, but from an economic point of view we know that we will all be feeling the turbulence stirred up by the pandemic for many years to come.
The Budget showed just how uncertain the situation is. It came with the forecast of a spike in inflation to 4%, underlining risks and uncertainties for the millions of savers whose retirement pots are predominantly invested in cash.
Earlier this year, the Financial Conduct Authority (FCA) said that: “There are 15.6 million UK adults
with investible assets of £10,000 or more. Of these, 37% hold their assets entirely in cash and a further
18% hold more than 75% in cash. Over time, these consumers are at risk of having the purchasing
power of their money eroded by inflation.” The FCA’s warning, coupled with the inflation figures released with the Budget, underline the urgent need to address this risk.
Looking to the future
There are both threats and opportunities for people looking to save for their future. This is equally true for those planning for later life and long-term care. The government has recently committed to setting a cap for care costs of £86,000, starting in October 2023 and, it has said, it will require local authorities to negotiate the cost of care with providers on behalf of self-funders as well as people receiving state assistance. These are two very welcome developments.
The cost of care runs to tens of thousands of pounds a year and some people in later life may need personal care for a decade or more. It is entirely reasonable that taxpayers should step in and prevent people in these extreme circumstances from losing practically everything that they have built up over their lifetime.
It is also reasonable that the cost of care should be uniform for everyone. A system where self-funders
paid more than anyone else for the same level of care could only ever act as a deterrent to self-reliance.
However, even if we assume that it is possible for the increase in National Insurance to be diverted to personal care in 2023 as planned, there are still many uncertainties for individuals preparing financially
for later life.
Whatever uncertainties lie ahead, one thing that is inevitable is an increasing need across the UK for financial advice during the coming decades – the only real antidote to turbulent times is the expert help of a professional.
Which leads me finally to saying a huge thank you to the hundreds of members who have already engaged with the Shaping the future together consultation. We are creating a genuine, open debate around the issues that matter to you, your clients and the wider profession.
There is still time to make your voice heard, so I encourage those from across the profession to let us know about your experience of being a member and to help shape the future of the PFS and strengthen trust in our profession.
Dr Matthew Connell is director of policy and public affairs of the PFS