Auto Enrolment

The requirement for Auto Enrolment Pension Schemes is hotting up. This calendar year will see 46,000 pension schemes reach their Staging Date. It has been getting really busy for pension providers.

We are already seeing stresses from pension providers and the test of their resilience hasn’t really started. One major pension provider is in consultation to increase Employer’s fees; others are expected to follow suit.

Advisers, pension providers, accountants and payroll providers need to brace themselves for 2016. Depending on whom you listen to or which reports you read, anything between 500,000 and 600,000 pension schemes will reach their Staging Date in 2016.

The message here is get your scheme set up now. Supply and demand will only mean one thing; the cost of advice, support and possibly the pension schemes will increase.

Freedom and Choice

We have just completed 7 months under the new pension legislation. To date, our experience has been reasonable with only one or two strange enquiries – a local man phoned in after finding us on the internet and asked us if we could help him cash in his pension scheme. The problem was he was only 34, more than 20 years from being able to access his pension at age 55!

Under current legislation you can draw your pension benefits between the ages of 55 and 75.

Apart from the few strange enquiries, we have found the new pension legislation brings a wide range of options for people drawing their pension benefits from money purchase pension schemes. Our clients can use the rules to their advantage and we can help them draw pension benefits in a flexible and tax efficient way.

The new rules also make pensions a heritable asset that could pass down family generations. The tax position now is far less penal.

Summary

Recent pension legislation changes appear to be working well but any further changes could upset the delicate balance between the State and the working population. The State needs to keep everybody engaged in funding pensions to help take the strain off the State Pension system.

What we need now is some stability and to maintain the status quo for the long term but this seems unlikely. The government have recently completed consultation on whether to change the way pensions are taxed.

Reducing tax relief on pension contributions could be a short term gain for the Chancellor and a long term loss for the State. Politicians need to think longer than 5 years.

Steve Speed Dip PFS

November 2015