The Queen delivered her annual speech this week and pensions were clearly on her agenda.
There have been fears that some people who save into work based auto-enrolment pension schemes could lose their money if their scheme collapsed, and the Queen announced a new Pension Bill to help alleviate these worries. The Bill also covers new controls over provider charges applied to people exiting their pensions at retirement and introduced a new guidance service to help those retiring access information they need.
Employers may choose to use master trust schemes as their Qualifying Workplace Pension Scheme to meet with their auto-enrolment obligations. In February, an investigation by the BBC found that dozens of master trust schemes appeared too small to survive and some experts said up to a quarter of a million people were at risk of losing their pension savings*. The new Bill provides the Pensions Regulator (TPR) greater powers to more strictly supervise master trust schemes in the future. This new regulation is an important step forward to minimise this savings risk and will give the Regulator power to take action where there are concerns.
The new pension bill also addressed the issue of ‘exit fees’ which have been unfairly penalising many people entering retirement, by charging them significant sums of money when they cash in their pension savings plans. According to the Financial Conduct Authority (FCA) as many as 700,000 people might be liable to pay such charges. The Queen announced in her speech that these fees will now be capped, but we are yet to find out as to what level.
Elliott Silk, Head of Employee Benefits at Sanlam was asked for his view on the stricter controls of master trust schemes and the intervention of pension scheme exit charges, he said: “The savings of millions of pensioners could now be better protected through the announcement of new master trust protection, which is to be applied on all schemes calling master trusts into strict line. The Government is making real headway by protecting people in these master trusts, which will include millions of automatically enrolled savers. On top of this, the capping of early exit fees, charged by trust-based occupational pension schemes, will ensure that occupational scheme members are not prevented from taking advantage of pension freedoms.”
Retirement is an important point in everyone’s financial lives where irreversible decisions can be made. Recognising this, the Queen’s speech also announced that a new guidance body will be set up to help people retiring. It will bring together the Pensions Advisory Service, Pension Wise and the Money Advice Service.
Sanlam’s expert, Elliott Silk, responded to this change saying: “The Government’s decision to restructure financial guidance, including the introduction of a new pension guidance body, could help simplify and streamline the pension guidance services to UK consumers. However, the closure of the much-criticised Money Advice Service should serve as a learning-curve to Government: it is absolutely vital that any new guidance service is fit for purpose, and that it offers consumers easy access to the information that they need. This includes providing the necessary education around new products such as the Lifetime ISA, as well as explaining historic pensions changes, for example. Indeed, our recent research showed that 15% of the over-60s working population already find the process of retirement too confusing, so it’s absolutely vital that this group is offered appropriate help and guidance.”
If you are approaching retirement and want to discuss your retirement savings plans or find out more about the new Pensions Bill, or alternatively, if you are an employer and require assistance with auto-enrolment we will be able to assist. Email firstname.lastname@example.org we would be happy to help.