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Where's the letter from 100 people living in poverty?

The election debate will be dominated by business leaders, bond markets, the Health Service and the public finances. The poor have been written out of the script.

Despite George Osborne’s recent claims, poverty in Britain is growing. Driven by an increasingly fragile jobs market, the rise of insecure work and a more punitive benefits culture, poverty levels have been rising for a generation.  Whatever measure is used, poverty levels are much higher than in the 1970s. They are also close to double the average of other rich countries.

Deprivation levels are higher today than in the late 1990s. Today more households live in a damp home while three times as many cannot afford to heat their home adequately. The numbers who skimp on meals is at a 30 year high. The poorest fifth in Britain are 40% poorer than their counterparts in Germany and 30% poorer than in France.

Britain is an increasingly divided nation. While affluence, comfort and an array of choice is the norm for many sections of society, daily hardship and struggle is the lot of a large and growing cluster of the population.  Close to a third  (more than three out of five them in work) not only lack a range of key, publicly-defined necessities, but suffer multiple, related problems as well, from damaged health, fragile finances and declining work and housing opportunities. On current trends this great divide in living standards is set to worsen over the next five years. Britain is now close to the American model, extreme affluence aside growing and deepening hardship, with the poorest facing a declining prospect of progressing beyond the barest of living standards.  

Growing affluence for most is, remarkably, associated with rising, rather than falling, hardship for a significant and growing minority.  This inverse relationship is being is driven by surging inequality, with the gains from growth over the last thirty bypassing the poorest, colonised instead by the top 1 percent and playing havoc with jobs, pay, housing and life chances for the poorest.

Ministers gloss over the realities of modern life for millions while creating a political culture that is more anti-poor rather than anti-poverty. Despite this, poverty is barely an election issue.  In the 1980s, Mrs Thatcher banned her cabinet and civil servants from using the ‘P` word.  Despite Michael Gove’s call on his party to become ‘warriors against the dispossessed`, the poor are again being written out of the political script.

In 2010, all the parties signed up to the 2010 Child Poverty Act, with its legal obligation to cutting poverty levels by 2020.  Yet in Government the coalition parties have simply ignored the Act and tried to redefine poverty levels downwards while dismissing rising deprivation as self-inflicted.

After the war, economic and social policy was guided by the ‘distribution question’. Yet the once central question of how we divide the cake – dismissed as ‘poisonous’ by one leading pro-market thinker  -  has simply been eliminated from economic thinking.  Today there is plenty of talk about inequality, but neither of the major parties has a clear strategy for closing the gap and reversing the rising poverty tide. Despite Gove’s call, the Conservatives promise a further weakening of Britain’s increasingly patchy safety net. Labour will slow the pace of retrenchment in welfare spending while offering a modest increase in the minimum wage and a bit more tax on the rich. Over the next five years, the existing anti-poor and pro-rich social and economic system is thus set to remain intact, still programmed to steer more and more of the cake to the wealthy few

If we are to reverse the rising poverty tide, we need a new direction, one that steers more of the cake to profits and less to wages, one that ends the culture of entitlement still at work in the City and company boardrooms and that tackles the issue of the over-concentration of private ownership in the UK. This means a much more direct challenge to the entrenched corporate and financial vested interests that continue to dictate large chunks of economic policy, while diminishing wider life chances.  

Poverty and inequality are two of the most urgent issues of the day. Yet, in today’s climate of political inertia, with its bias to the status quo and its fear of radical change, the kind of policies that would make a real difference are not even part of the election debate. Until that inertia is challenged, and the talk turned to action, poverty and inequality will continue to intensify.

Stewart Lansley is the author (with Joanna Mack) of Breadline Britain, The Rise of Mass Poverty, Oneworld.

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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/