Now The Real Pension Story Unfolds
2015 is going to be a massive year for pensions with reforms coming into force and a general election to spice things up further. DAM's Alex Keddie takes a look at the state of the pensions industry and what lies in store.
Amidst all the revelry of the festive season and the onset of another New Year it is easy to forget that within 3 months the pension landscape will be changing significantly - ideally from a land of confusion into a panacea of flexibility and understanding. Mind you, with a forthcoming General Election don’t hold your breath!
The media coverage and commentary following the aftermath of the Chancellors budget speech and the hyperbole of the pension minister’s Lamborghini comment is over. We now need to implement and put into action the changes and clarify any remaining outstanding aspects.
Financial Advisers are ready to serve – the last few years have seen the increased level of qualifications (which many people outside the industry may not be aware of) enhance the Financial Services industry’s professionalism. The reduction in the transactional nature of business has meant the customer remains the key focus.
Providers are working hard to meet the challenging timescale which the government introduced in the budget so we can expect launches of new products imminently. Crucially, however, will the customer coming up to retirement in the next few months be aware and willing to maximise their retirement opportunities? The positive aspect is the increase in the number of queries being raised from individuals looking at their retirement options which does demonstrate that the message is out there.
The guidance element to be offered by Citizens Advice Bureau (CAB) and Pensions Advisory Service (TPAS) is also welcome, especially for those on lower pension “pot” values – bearing in mind the average pension “pot” in UK is estimated in the region of £35K - as were the auto-enrolment reforms introduced in 2012 as an attempt to improve this figure for future generations.
We must remember that prior to the budget announcement there were always alternatives for individuals approaching retirement to consider if they were prepared to seek and pay for financial advice. We, as consumers, are prepared to shop around for the best holiday or insurance premium but for some reason shopping around for the best annuity deal - what is likely to be one of the most significant purchases during a lifetime - remains an enigma. Another aspect which has always baffled is why a married individual should select a single life pension (income).
Value can be had from a pension. It isn't newsworthy to report the positive message of the millions of people who have received and are still receiving (some for over 30+ years) an income from a pension. If anything, the reforms should make individuals think and make a decision which will be different to what they have had to make in the past.
Difficult and complex decisions require specialist advice, though, and Independent Financial Advisers are ideally placed to assist. If you know an individual, family member, friend or employee coming close to retirement who could benefit please share this post or direct them to our retirement planning advice page for more information.
Photo credit goes to Jo Naylor