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Advisers are getting desperate on pensions uncertainty

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

“Calling for clarity” is a hackneyed expression, but its overuse in the pensions market does not make it any less relevant today.

The expectation this year is for all eyes to be on the UK’s Brexit negotiations and the impact of President-elect Trump on global markets.

With all this to contend with, there is a risk that creating better pensions policy becomes little more than a sideshow. But for the Government to continue on its current trajectory unchallenged could be dangerous for all concerned, and particularly for advisers and their clients.

There are positive moves afoot, such as the pensions dashboard, as well as ongoing work by various organisations on costs and transparency. At the same time, there are efforts to make the pension system more sustainable, whether this is the review of the state pension age or the upcoming Government green paper on defined benefit schemes.

But there are fundamental questions the advice profession want answering, and to which clear Government responses would create the bedrock for stable financial planning. As yet, the answers have not been forthcoming.

One of the big issues the Government needs to tackle is the questionable existence of a much reduced lifetime allowance. Advisers and providers would also like to see certainty on the direction of travel on the never-ending saga that is pension tax relief. Finally, and perhaps most pertinent of all, is the question of what the Government is looking to achieve with pension policy in the round.

After speculation about the pension Isa, last year the Treasury chose to fudge the issue with the creation of the Lifetime Isa, due to launch in April. Is the Government really looking to usurp traditional pension saving with an Isa model? If so, it is going the right way about it.

Speaking to advisers, what comes across is an increasing sense of desperation that these important questions will continue to go unheeded and will be left hanging in the air, making any conversation about the value of pension saving increasingly difficult.

Writing for Money Marketing this week, pensions minister Richard Harrington sets out the issues that are at the top of his agenda and outlines some of the challenges the industry faces. What is positive is this is a department clearly in listening mode. The next step is for clear, joined-up action. And sooner rather than later.

Natalie Holt is editor of Money Marketing

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. who is getting desperate? MM for a story maybe . . .

  2. The main concern is that there is a constant fear that ‘this year might be the last’ for tax relief when in fact, despite what many say, I can’t see why the tax relief system is broken.

    Yes, higher earners get more relief, but that’s because they pay more tax! Likewise, if tax rates fall, the highest tax payers save the most as they’re the ones paying the most tax. Tax relief means that tax on income is deferred – the fact that Governments have left the Country short of cash flow shouldn’t impact on the premise of pensions.

    We also have the ‘threat’ of Tax Free Cash being removed and the ongoing changes to Lifetime and Annual Allowances – in a world where everyone wants to reduce the cost of investing, constant tinkering means that the cost of advice remains a large part.

    Pension simplification was a breath of fresh air – but didn’t last long. The pension freedoms have reinvigorated pensions – lets hope that politicians don’t see that go the same way.

    On a side point – one welcome change would be the ability to have pension income paid tax free to care homes (as is the case with PLA) – giving those worried about care further impetus to save for later life using pensions whilst potentially reducing the cost on the public sector.

  3. Good suggestion about care fees

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