Nick Clegg sits with children at the Mace Montessori nursery on September 2, 2013 in London. Photograph: Getty Images.
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To solve the living standards crisis, all parties need to go much further on childcare

Too many many parents are trapped at home or are only able to work a few hours a week because of the rising cost of childcare.

With the price of childcare increasing at double the rate of overall inflation, there now seems to be agreement across the three main political parties that more needs to be done to make childcare affordable. This is likely to become a key battleground at the next election. Family living standards and childcare affordability is a doorstep issue in battleground seats across the country.

Many parents want to work but can’t afford to. Among two-parent families with children, the risk of child poverty is four times higher in families where only one parent works than in families where both do. Our original modelling, published today, suggests that the incomes of families with children aged less than five stand to gain an average of 20 per cent in disposable income upon a mother’s transition into work.

Families with children who are already in work are spending a larger and larger proportion of their income covering childcare costs. The Resolution Foundation has estimated that a median-income couple working full-time with two children aged 2 and 4 now pay out a huge amount for care, around a quarter of their disposable income.

Many people who are already working would like to work more hours but can’t afford too. Surveys of mothers frequently reveal a large gap between the hours mothers would like to work and the hours they currently are. A recent DWP survey found that more than 60 per cent of couples not working full-time would be willing to increase their hours of work if the extra costs were covered by the government. Again, if their needs can be met it is families themselves who stand to gain - our modelling shows that a mother transitioning from working part-time to full-time would see their disposable family income rise by around 20 per cent.

Of course, it is not just incomes that are at stake. Childcare is also good for child development and having more mothers in work would help to reduce gender inequality in earnings. But in an era of squeezed wages and cuts to working-age benefits, work can provide a valuable route out of poverty and lift living standards for families with children.

So what are the political parties planning to do? The coalition announced extra funding in last year’s Budget to increase the value of childcare cash subsidies to families, through a new offer of tax-free childcare vouchers and within Universal Credit. The Labour Party, on the other hand, has said that it would also extend the weekly entitlement to free childcare at ages three and four from 15 to 25 hours for working families.

But if we are to support more out of work parents into jobs, we will need to go further. In most other countries with high rates of employment among mothers of under-fives, publicly subsidised childcare is offered for more hours than in the UK. Prices are often capped so that parents only have to spend around 10 per cent of disposable incomes on care. We should be exploring both options here in the UK. Parents also need high quality childcare that is sufficiently flexible enough to fit around their work schedule. It‘s vital that we address the lack of provision at evenings and weekends.

Not all parents of young children want or are able to work. Public policy that supports parental employment should not be forcing people into the labour market. But many parents are trapped at home or are only able to work a few hours a week because of the rising cost of childcare. Helping this group into jobs and to progress has enormous potential for tackling the cost of living crisis, and should be a key focus of childcare and early years policy.

Spencer Thompson is Economic Analyst at IPPR

Spencer Thompson is economic analyst at IPPR

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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/