Economic confidence at its lowest since the financial crash

Polls show increasing public discomfort with the economy -- but Labour is not capitalising on this o

Two polls today show that the public is increasingly pessimistic about the economy. A Guardian/ICM poll found economic confidence at its lowest level since just before the financial crash in 2008. Fifty-seven per cent of respondents said they were not confident about the state of the economy, while 42 per cent did, giving a net confidence index of -15 points. Since ICM began measuring financial confidence in 2001, it has only been lower once (July 2008).

A Times/Populus poll (£) has similarly poor results, with 79 per cent of voters saying they believe the country will fare "badly" over the next year, versus only 18 per cent who think it will do "well". This gives a net optimism score of -61, a 21 point drop since September. While the questions and indexes are slightly different in each poll, this too is the lowest score Populus has found since the time of the banking crisis, in January 2009.

There are clear reasons for this: unemployment is steadily increasing, growth predictions are constantly lowered, and the eurozone crisis is unsettling markets. All of this would appear to be bad news for the government and its austerity package, and a blessing for Labour.

However, this is not the case. The ICM poll found that 30 per cent still blame the slowdown on debts accrued by Labour, with only 24 per cent blaming the coalition's spending cuts. Meanwhile, the Populus survey found that 40 per cent of people trusted David Cameron and George Osborne to run the economy, while just 26 per cent said they had more faith in Ed Miliband and Ed Balls.

While both polls saw Labour keep its narrow lead (two points ahead with ICM and eight with Populus), these results on the economy show the extent to which the party is missing an open goal. Yesterday, Cameron admitted that the government may not reach its deficit reduction targets, telling the CBI conference that "getting debt under control is proving harder than anyone envisaged", partly because of sluggish growth. The Office for Budget Responsibility is expected to downgrade its forecast -- again -- next week, when Osborne makes his Autumn Statement.

The coalition's narrative that Labour's profligacy is entirely to blame for this crisis should not hold for much longer: their policies are doing little to help the recovery; indeed, are compounding the problem. As Nobel Laureate Paul Krugman put it: "Austerity in Britain is going really, really badly." Labour must step up its visibility and present a clear, thought out alternative strategy if it wants to seize the opportunity of growing public discomfort with the way the economy is headed.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/