Spence & Partners latest blog for Pension Funds Online
It’s been 7 months since the new pensions freedom flexibilities came into effect, completely re-drawing the landscape of retirement savings. During that period, around £5Bn of cash has been withdrawn from the pensions system, both from cashing in small pots and drawing income out of larger ones. However, with an average “cash-in” value of around £15,000, Lamborghini dealers are still waiting to join the party.
Concerns about profligate retirees blowing their retirement savings have so far not come to pass, with general feedback from the industry that people tend to be quite sensible in the decisions they are taking over their retirement income. This is not particularly surprising – it seems a little unlikely that someone who has saved all their working life would suddenly spend the lot as soon as it become accessible; hard-working savers deserve more credit than that. Read more »
Whilst auto-enrolment (AE) has provided invigoration to the pension sector and many employees are engaging with pensions for the first time, there are still historic pension schemes hanging about creating headaches for employers that do not provide the best retirement options for members in today’s market. Spence is actively involved in assisting employers by investigating the possible options available to them to manage both their existing pension scheme liabilities and their new responsibilities under auto-enrolment.
Although liability management exercises have previously been seen to be more advantageous for the employer rather than the member, the dawn of Pension Freedoms from April 2015 has proved that these exercises can now be more attractive to members as well as employers. In addition to reducing an employer’s pension liability, these exercises also give members the opportunity to explore alternative and potentially more beneficial options, available to them in the pensions market. So it’s a win-win for everyone!
Employers – what do we need to know? Read more »
Following the Pensions World’s latest Third Party Administration (TPA) survey Allison Plager reports that the TPA market is awash with activity as more schemes are looking to de-risk as well as keep up with recent industry changes. One such change of course, being the introduction of pension freedoms. Our very own Head of Administration, Suzanne Wilson was available to comment on the effects this will have on schemes without sufficient technological resources to manage the demand.
Allison, rounds off the report by urging trustees to ask questions of their existing or prospective TPA to ensure that they are ready for the new challenges. You can read the full report on the Third Party Administration (TPA) annual survey here.
In the run up to 6 April 2015, the focus has been on defined contribution (DC) members and the new flexible options available to them. This focus has now begun to swing to the (potentially significant) number of defined benefit (DB) members who will seek to transfer their rights in order to take advantage of these new flexibilities.
To this end, trustees of DB schemes must ensure that their adminstrators have taken the necessary steps to prepare accordingly and to take into consideration any impact on transfer-related Service Level Agreements.
Recent press items suggest that we are about to see an avalanche of transfer activity descend upon DB pension schemes. Read more »
Annuity freedom announced in Budget, but the devil, as always, will be in the detail.
“People who’ve worked hard and saved hard all their lives should be trusted with their own pension.” George Osborne 18 March 2015.
As widely trailed the Chancellor announced yesterday that the Government will extend its pension freedoms to around 5 million people who have already bought an annuity. This will be achieved via legislation to remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity without unwinding the original annuity contract. The change will be effective from 6 April 2016.
They can either take it as a lump sum, or place it into drawdown to use the proceeds more gradually, extending the flexibilities due to come into effect on 6 April this year for those who have yet to draw benefits. Read more »
So, there will be no quiet budget for pensions then. It would seem that Mr Osborne’s rabbit is already out of the red box. The pretence of “leaks” has been set aside with Mr Osborne confirming some details of this week’s announcements already.
It is therefore expected that individuals will be able to cash in annuities for a lump sum from April 2016 onwards (assuming Mr Osborne and his chums are in situ to make the changes – that being said, such populist moves are hard for others to ignore and the extension of pension freedoms seems inevitable). Mr Osborne is quoted as saying:
”It’s all part of trusting people who have worked hard and saved hard all their lives…. By changing the law we are trusting people who have worked hard and saved hard all their lives.” Read more »
Following the horrendous suffering of WWI the French were determined never again to be invaded by Germany. There was a tremendous focus on fortifying the Franco-German border. A tremendous focus on building a line of concrete fortifications, obstacles, and weapons installations between themselves and the Germans. A tremendous focus on building the impregnable Maginot Line. In 1940 the German Army simply drove around it in their tanks and conquered France in about 6 weeks. Via Belgium.
Such is the folly of focusing on the wrong thing.
There has been a lot of worthy stuff going on around DC pensions of late. Regulatory guidance, upping governance, capping charges, auto-enrolment and, especially, pension freedom. Master trusts have a lovely new, shiny, impregnable assurance framework. You don’t have to hand your money to an insurance company any more. Read more »