Ian Bird, Partner at ACEVO Corporate Partners Foster Denovo, explains what the recent Queen’s speech means for the ever changing pension landscape and for your organisation:
2014 has already seen a number of significant changes to pensions and the latest Queen’s speech saw the announcement of two further pension bills. In it’s final parliamentary term before next year’s general election, these latest announcements demonstrate Steve Webb and the Coalition Government’s unwavering determination to leave no pension stone unturned.
Pensions Tax Bill
Designed to give greater freedom to pensioners to cash in pension pots, this bill implements the abolition of the annuities rule, which was first announced by the Chancellor in the 2014 Budget.
my concern is that many people approaching retirement may lack the necessary skills and knowledge required to make these choices
Some believe that that scrapping the need for an annuity will provide those nearing retirement with greater choice, financial freedom and better value for money. However, there is also concern that removing the need for any annuity could see some people blowing their pension pots – cue the “pensioners driving around town in Lamborghinis” headlines – and ending up being solely reliant on the state at retirement. Others believe that some will take this opportunity to invest their pension pots in an already overinflated buy-to-let housing market.
As a financial adviser to over 180 charities, my concern is that many people approaching retirement may lack the necessary skills and knowledge required to make these choices and now be unsure about what they should do in order to secure the income they require in retirement. The government intend to provide financial ‘guidance’ for those nearing retirement but what form this guidance will take and who it will be provided by is still to be determined. It is also important to note that ‘guidance’ is different to ‘advice’ and will still require the individual to make the final choice about their retirement income.
Private Pensions Bill
This bill has been designed to increase pension saving and provide wider choice and control to employees through the launch of new “defined ambition” collective pension schemes. These schemes are similar to personal pensions but as groups of workers can pool risk between them, the scheme offers lower charges and more flexibility to invest for the long term.
the choice of another type of pension scheme for their workforce, when there is already so much pensions upheaval and change, may be one step too far
This is turn will allow savers to have greater certainty about their retirement savings and a better indication of what they will receive at retirement. A similar arrangement already operates in the Netherlands.
Although collective pension schemes may sound beneficial, this legislation is still in its infancy and the devil will undoubtedly be in the detail. For some employers, the choice of another type of pension scheme for their workforce, when there is already so much pensions upheaval and change, may be one step too far. I believe that many organisations will want to achieve stability and continuity with their existing pension arrangements before they will consider changing them again.
Support for ACEVO members
In my 25 years as a financial adviser, I cannot ever recall a period of such significant change with pensions landscape as is currently taking place. The amount of change and complexity of these changes – Auto-enrolment legislation, changes to Annual Management Charges (AMCs), abolition of commission, changes to annuities – make it difficult for charity employers and their staff to know what choices to make and if indeed they are making the right choice.
As part of our ongoing commitment to ACEVO and the sector as a whole, I would encourage you to get in touch via our free ACEVO pensions helpline if you wish to discuss any of the pension changes that are taking place and how they may affect your organisation.
ACEVO members can access Foster Denovo support by calling 0845 838 1234 or email ian.bird@fosterdenovo.com
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