The recent Queen’s Speech contained little on pensions, which may lead some to think the next six or nine months will be a quieter period. But that is absolutely not the case.
Instead, we have a raft of measures affecting all parts of the industry to look forward to – or cower behind the sofa from, depending on your point of view.
The snappily titled Markets in Financial Instruments Directive II is implemented in the UK on 3 January 2018. The FCA recently issued its final policy statement covering this, containing a whopping 1,068 pages, enough to send even the most hardened geek into meltdown.
Mifid II will mean changes for many advisers. One of the key requirements is making sure there is a consistent approach to documenting relevant client discussions, although the regulator has stepped back from requiring widespread call taping.
Last week saw the FCA’s latest rendition of its Retirement Outcomes Review land, and there are a whole bunch of other reports due. Its strategy on the ageing population should appear in September, and its consultation on the topical issue of transfers from final-salary schemes closes on 23 September.
Then we have the first Autumn Budget to look forward to and, given the fragile state of the Govern-ment, it is difficult to predict what measures that may contain. Despite the Conservative manifesto supporting a move to a pensions double lock from 2020, the terms of the deal between them and the Democratic Unionist Party mean there will be no change to the triple lock.
We also await an announcement from the Government on future increases to state pension ages. It was legally bound to give an update by 7 May but ducked that deadline due to the election.
One thing the Government has confirmed is its cut to the money purchase annual allowance from £10,000 to £4,000 will apply retrospectively from April this year.
In a statement, the Treasury said: “The Finance Bill introduced in March 2017 provided for changes to tax legislation that were withdrawn from the Bill after the calling of the general election. The then-Financial Secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.
“The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions. Where policies have been announced as applying from the start of the 2017/18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced.”
Meanwhile, a review of automatic enrolment will be published before the end of the year. Auto-enrolment now covers all employers in the UK and April will see the minimum contributions rise to 5 per cent, with a further increase to 8 per cent from April 2019. The review will seek to build on auto-enrolment’s success by considering whether coverage should be extended (for example, to those earning below £10,000) and to the self-employed. The future level of contributions is also a key ingredient. There is widespread acceptance that 8 per cent of band earnings is not sufficient to provide a quality retirement income. However, there is less agreement on future steps and how – and when – we move individuals and employers along that journey.
There are a number of other changes, including work falling out of the FCA Asset Management Market Study and adaptations needed to fulfil the requirement for customers to be given a comparator of rates when buying an annuity which comes into force from March 2018. And, of course, keep an eye on developments for the pension dashboard.
All in all, a very busy autumn. Hopefully, the Government will also find time to fit in some much-needed measures to reduce the number of people being affected by pension scams.
Andrew Tully is pensions technical director at Retirement Advantage