According to research conducted by the Association of British Insurers, almost 30% of the people surveyed said they would not save their own money towards retirement if means testing on those savings meant their State benefits would be reduced.
Another 30% of the people surveyed believed there was no point debating the subject as they thought the Government would have changed the rules by the time they came to retire. However, 23% believed that they should still save towards retirement, with means testing seen as irrelevant.
Our View
Governments do change their policies and this makes it very difficult for advisers to do the job we are paid for. When advising people on lower incomes that make minimum payments into pensions, they may well be better to spend it rather than save it towards retirement if they will fall into the means test trap
.In our view the State system is fundamentally flawed in that it generally rewards those who do not save. This will have to change but how to do it without penalising others in the meantime is not going to be easy.