The government’s upcoming 2025 pensions review has sparked important conversations around the assets that underpin our financial futures. While many are rightly championing the inclusion of rainy day savings and property alongside pensions, the focus needs to go much further. If we stop there, we risk creating a narrow framework that inadvertently favours financial capital as the primary solution to funding retirement.
This approach misses a critical element—human capital, the value of our ability to earn throughout our lifetimes. Ignoring this not only paints an incomplete picture but also perpetuates a system where solutions are skewed towards growing assets under management, often to the detriment of an already stretched public grappling with the cost of living crisis.
The Signs of Change
Industry commentators are starting to notice the cracks in the government’s current approach. For example, Scottish Widows’ head of policy, Pete Glancy, recently called for a Lifetime Savings Commission to evaluate all forms of retirement savings, including rainy day funds and property. While this would be a welcome step forward, it’s only part of the solution.
Glancy’s comments highlight a growing awareness that broader financial planning tools are essential for a balanced and accessible retirement system. However, these discussions still tend to overlook the biggest piece of the puzzle: the role of human capital in shaping lifetime cashflows and securing long-term financial well-being.
Why Human Capital Matters
Human capital is the foundation of financial security. For most people, earnings provide the bedrock of their financial lives, funding not only their day-to-day needs but also their ability to save for the future. By failing to factor human capital into the pensions review, we risk distorting policy incentives towards transactions that prioritise financial products over sustainable, holistic solutions.
For example:
- Encouraging asset growth at the expense of personal financial resilience can leave individuals over-reliant on investments that may not align with their actual needs or risks.
- Overlooking the value of earnings and their management through life transitions can hinder effective planning for both retirement and shorter-term goals.
A more inclusive approach to retirement planning would integrate human capital with financial capital. This would ensure that the solutions proposed truly reflect the diverse ways people build security across their lifetimes.
Addressing the Bigger Picture
To ensure fairness and accessibility, the pensions review must avoid becoming a vehicle for industry interests seeking to gather more assets under management. Instead, it should empower individuals to leverage the full spectrum of their resources—human, financial, and social capital—to achieve financial independence.
A broader perspective would:
- Reduce reliance on financial products as the sole solution to retirement challenges.
- Foster financial literacy and self-reliance, helping people make informed decisions about their futures.
- Support policies that reflect the realities of today’s workforce, where career changes, gig work, and varied earning patterns are the norm.
Building a Sustainable Future
The cost of living crisis has amplified the importance of rethinking how we prepare for later life. People deserve a system that supports their aspirations without adding undue complexity or financial burden. By including human capital in the pensions review, the government can provide a framework that values people’s earnings as much as their savings, ensuring a more balanced and inclusive approach to financial planning.
A Call to Action
As we move closer to the review, it’s essential that policymakers, industry leaders, and the public push for a broader perspective. Let’s ensure the 2025 pensions review considers every aspect of our financial lives—not just the assets we accumulate, but the earnings that enable us to save in the first place. Only then can we build a retirement system that is fair, accessible, and truly supportive of everyone’s journey towards financial security.
If you believe in a more inclusive approach to financial planning, now is the time to make your voice heard. Together, we can advocate for a pensions review that empowers people, promotes transparency, and embraces the full potential of our financial lives.
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