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Why the Govt’s pensions policy needs reviewing

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

When Andrew Bailey swept into power as FCA chief executive, it signalled a new regulatory era. He came in and started afresh. The resulting Mission document, which sounds vague in the extreme, stemmed from Bailey’s desire to reassess whether the regulator’s priorities are the right ones and on that basis, the Mission is well founded.

At the Government level, the shift from George Osborne to Philip Hammond as Chancellor has been noticeable too. Not just in the difference in character, but in the fact that Hammond wasted no time in consigning the secondary annuities market to the dustbin.

On pensions, we are still grappling with the ministerial transition from Ros Altmann to Richard Harrington. One provider has privately told me Altmann was about knowledge and ideas but on a less stable footing, whereas Harrington represents a more stable, if perhaps less informed, starting point.

So where does all this rearranging of the deckchairs leave us when it comes to pension policy?

Everyone is still trying to work out what the Government wants to do about pension tax relief, though it was pretty clear in its statements in the Budget documents announcing the cut to the money purchase annual allowance that it has concerns about “resources” being used effectively.

There are two policy initiatives that need to be addressed, and to advisers these are blindingly obvious.

The first is the Lifetime Isa. I have spent the last few weeks going round the country with our recent MM In Focus events and hearing panellists and advisers raise repeated concerns about the interaction with auto-enrolment, the punitive exit charges and that a complex product is being badged up as an easy-to-understand Isa.

With the exception of secondary annuities, there are few ideas that have garnered such negativity before the product has even got out of the gate.

The lifetime allowance has also come under fire, owing to the difference in treatment between DB and DC savers. Harrington felt the full force of advisers’ wrath on this subject last week.

Hammond and Harrington may not have the luxury of taking a blanket approach to redrawing pension policy altogether. But they may want to take a leaf out of Bailey’s book on reviewing their objectives. Advisers and the pensions industry always talk about “no more tinkering” with pensions. But change for the better? That would be very welcome change indeed.



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There is one comment at the moment, we would love to hear your opinion too.

  1. The government seems determined more than ever to head in the very opposite direction from the one in which the industry is trying to tell it. It claims that loads more people are now saving towards the accumulation of a retirement fund but, in reality, this is almost entirely as a result of AE.

    How many self employed people are paying into a RPS? (Ever fewer, so I read recently).

    How many people are contributing a penny more than the terms of their employer’s AE scheme requires them to?

    How many people consider that cutting AND freezing both the LTA and the AIA are strangling retirement saving at both ends of the equation?

    If it wants genuinely to rebuild confidence in retirement saving, why won’t the government restore Contributions Insurance and Life Cover as integrated elements of a RPS (the latter, perhaps, subject to maintenance of a minimum level of contributions towards retirement benefits)?

    What is the justification for the tapered contributions allowance, other than a spiteful attack on high earners? If the government is concerned about allowing too much tax relief, why not just limit the top rate to 30% for high earners?

    The list goes on and on, whilst public confidence in retirement saving goes down and down. It’s all very dispiriting.

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