IFS criticises government's public pension reform

02 February 2012

Homeowners may be considering their financial options after a new report by the Institute of Fiscal Studies (IFS) claimed the coalition government's reform of public pensions is not going to save money in the long-term.

With many individuals likely to see their retirement income cut as a result of the changes being made by the Conservative-Liberal Democrat alliance, it could mean products such as lifetime mortgages are set for a boost in popularity in the coming months.

RPI to CPI indexation

Deputy director of the IFS and co-author of the report Carl Emmerson stated the decisions to switch from RPI to CPI indexation of pension benefits will reduce the generosity and therefore the cost of pension schemes to the taxpayer in the long-term.

He said: "But the consequence of the long-drawn-out negotiations over the latest reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers."

Locations vary payouts

Wenchao Jin, a research economist at the IFS and co-author of the chapter, added evidence shows pensions across the UK may vary from location to location, pointing out more generous pay awards can be found in places such as the south-east, with lower settlements given to individuals in Wales and Northern Ireland.

Homeowners aged between 55 and 95 living in Northern Ireland and Wales may therefore wish to assess their options, with equity release schemes one of the ways they could be able to boost their income by unlocking cash from the value of their home.

Last month, the coalition government launched a new campaign with the aim of encouraging people to put more money away for their retirement.

It was announced by the Department of Work and Pensions that millions of pounds are also being spent on a drive to improve awareness of the upcoming auto-enrolment scheme that will see employers begin to automatically make pension contributions for their members of staff.

But for those already in their retirement, using the equity release calculator from Key Retirement Solutions may be a better way to secure their finances for their later years.