View more on these topics

Malcolm McLean: What will dominate the pensions landscape in 2016?


The changes to the UK pension system over the last few years have been seismic in their range and intensity. The original concept of a pension plan – to produce an income in retirement – has been turned on its head by the pension freedoms. What is more, we have a new way of (near) compulsory saving in auto-enrolment and a new state pension to boot.

But despite all of this upheaval we are not yet at the end of the process. In fact, we are probably not even in the middle of it. There is likely to be a lot more still to come.

So, as we approach the end of the year, here are eight areas I expect to dominate the pensions landscape in 2016 and for which, in many instances, the outcomes are as yet uncertain.

1: The single-tier state pension

This has not materialised as the “more generous, easier-to-understand, flat rate” pension many were expecting – at least not in the short term and possibly not for many years to come. The transitional arrangements are incredibly complex and difficult to explain. Contracting-out deductions, perceived loss of guaranteed minimum pension uprating and allegations of unfair treatment of women under the new system are likely to continue to be a source of controversy and debate up to and beyond the introduction of the new pension on 6 April 2016.

2: The ending of contracting-out

The loss of rebates and consequential increases in National Insurance contributions for both employees and employers with defined benefit schemes could prove extremely problematic when they take effect next April. They could prompt some employers in the private sector to recoup the extra costs by increasing members’ contributions, worsening the terms or even closing down their schemes altogether. Public sector schemes will be similarly affected but will have more limited options as to how they can absorb the extra cost. Expect to hear a lot more about all of this when the impact of the changes starts to hit home in the spring.

3: Tax relief

We await with bated breath details of the changes to pension tax relief the Chancellor probably has in store for his next Budget. This could involve either a single percentage rate for all (e.g. 30 per cent) or the even more radical pensions-as-Isas.

4: Auto-enrolment capacity crunch

Coping with the very large number of small employers who will be coming on stream over the next two years will be a major challenge for the pensions industry and for Nest in particular. It is not beyond the bounds of possibility that the phasing-in programme could be subject to delays or even grind to a complete stop as a consequence.

5: Help for the self-employed

There is a growing feeling that more help needs to be given to the self-employed to encourage pension saving. One possibility is that self-employed workers are included in the same way as employees as part of the auto-enrolment programme and, perhaps, receive extra tax-relief or a Government contribution to compensate them for the absence of a separate employer contribution. If and when this is to happen may become clearer in 2016.

6: Advice versus guidance

Arrangements for the delivery of financial advice are currently being reviewed by the regulator and could result in further changes to the classification and functions of advisers. Take-up of the new Pension Wise service is also under scrutiny, as are the interfaces between guidance and advice, all of which may result in a radical reassessment of the support available to consumers in relation to pension freedoms next year.

7: Annuity re-sales

Following consultation, the Government is expected to give the go-ahead for existing annuitants to hand over their annuities to an external bidder in return for a capital sum. There will be a requirement for the seller to obtain financial advice before proceeding in some cases. Further operational details are expected soon in advance of a start date in 2017.

8: New guaranteed retirement income products

With the decline in conventional annuity sales following the introduction of pension freedoms it is widely recognised there is a need for a new type of guaranteed retirement income product. Ideally, this would combine the best features of an annuity providing the security of an offer of a regular income for life with the flexibility to secure a partial return of capital if needed. It is expected that more of these types of product will come on to the market over the next few years.

Malcolm McLean is senior consultant at Barnett Waddingham



Robert Reid: Large firms should not receive special FCA treatment

The news that consolidators are under the microscope is long overdue. The number of times I have been told of an acquisition triggering a mass transfer of assets where ongoing charges increase with no corresponding increase in services is far too common to be apocryphal. Just how this works as suitable advice I have no […]

FCA logo glass 2 620x430

Osborne lines up Swiss regulatory chief to replace Wheatley at FCA

Chancellor George Osborne has approached the head of the Swiss financial watchdog as a possible replacement for Martin Wheatley, Sky News reports. Financial Market Supervisory Authority chief executive Mark Branson is among several candidates to have been approached about the position, according to the report. FCA acting chief executive Tracey McDermott, Australian Securities and Investments […]


SLI move signals beginning of the end as trail runs dry

Advisers still reliant on trail commission should prepare for the tap to be finally turned off by fund groups, say investment experts. It is thought the “writing is on the wall” for around £30bn of off-platform trail paying assets and advisers are being warned to adapt their business models accordingly. Last week Money Marketing revealed […]


Govt comes clean on Pension Wise performance

Pension Wise guidance appointments are costing almost £500 each, Government data reveals. The figure comes to light after policymakers bowed to pressure from politicians and the industry to boost transparency around the industry-funded guidance service. The Government has faced criticism from across the sector for failing to produce data on Pension Wise, which is paid […]

Navigating volatility

The making of any fund can be seen in how it responds to crises and opportunities. In this short video, Head of Multi Asset at Royal London Asset Management Trevor Greetham outlines how the Royal London Global Multi Asset Portfolios or GMAPs navigated through Brexit and the US election cycle. He also highlights the importance […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm