Article by Phil
Is more much needed pension help on its way with a new pension bill for savers?
The government has recently set out its plans for a new pension schemes bill. The timescales have not been established yet, but the bill will cover a range of initiatives including:
Help from Small pension pot changes
- Making it easier to combine smaller pension pots into one larger pot. This should make things a lot easier for savers and stop the problems arising from lost pension pots. In theory bigger pots should also offer better value for money.
- The launch of the online pension dashboard is key to the success of this consolidation. The dashboard has been in the works for years now and there are question marks over whether the IT system can be delivered on time and at a reasonable cost. We will see.
Easier Pension consolidation
- Allowing the formation of pension superfunds, allowing smaller defined benefit schemes to merge with other larger schemes. Again, this should in theory provide cost savings and therefore pensioner benefits. But these are the schemes that the government wants to invest in UK infrastructure projects. Some think this is a political move to get pension funds to pay for projects the government should be funding through taxation. The key is whether these infrastructure investments make returns for future pensioners. I’d be wary of “green” initiatives, especially after the solar energy scheme failure that bankrupt Thurrock council.
Easier to understand pension options
- The proposals will also see pension help through improvements to the way in which retirement options are delivered, making it easier for people to understand. This is all about the advice boundary which the FCA have been working on for years. But without finding a solution. It’s fine the way it works at the moment. If clients receive poor advice there is a complaint mechanism in place. But how will clients fare if the “guidance” from non-regulated advisors leads to poor decisions. Who will be responsible for that?
There are many questions to be answered before we can tell whether these changes are going to be able to work and whether they will actually help people when it’s time to retire. After all that’s the most important outcome.
Who will benefit from the pension changes
The Department of Work and Pensions (DWP) claims that 20 million people will see the benefits of the proposals. Especially through the small pension pots initiative linked to the pensions dashboard.
70% of men currently have a pension to manage, compared to 63% of women according to Unbiased. Although more women than men tend to hold investments.
More pension help is needed. Barnett Waddingham have found that men are underestimating their lifespan by four years and women by seven years. This means that men could be £20,000 short in their pension pots and women up to £35,000.
However, regardless of the changes introduced they will offer little comfort to the 1.5 million people who currently can’t afford to save into a pension. These mainly work in the temporary economy on a self-employed basis. This also includes workers on zero hours contracts. Overall, 2.8 million people work on this kind of basis and over half have no pensions. Pension Bee have called on the government to consider a universal pension help solution for these types of workers, but there is nothing like that in the proposed changes.
People confused about their pensions
The pension freedoms introduced in 2015 have created more confusion for people. That’s according to research by AKG who found that 45% of people said their retirement options were confusing. Despite that over 70% of retiree’s said that they preferred their more flexible pension options.
20% of people do not know what type of pension scheme they have or what their pension benefits are. According to Aviva. Over 50% had no idea how much the government contributed to their pensions in the form of tax relief for example.
Less than 30% could tell the difference between a Defined benefit and a Defined Contribution scheme.
Still only 20% said that they would pay for a financial adviser. That’s why better and easier to understand options at retirement are important.
Further Government pension review
A further consultation has also been announced by the government. This will look into the adequacy of pension incomes for future generations. This will be a wide-ranging review. But much needed given the increasing concerns about the welfare of retirees in the future with pensioner poverty a real concern.
Get more information.
For more pension help from your local financial adviser, why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
