Pension news
Pensionwake-up packs NEW RULES on pension ‘wake-up packs’ came into effect on 1 November 2019. These aim to make it easier for individuals to review their current financial situation, understand their options and any risks, and hopefully make better retirement decisions. The packs must be sent out once the individual reaches age fifty, and then every five years after that until the pension is fully cashed in. They will also need to be sent just before someone retires, whenever they request a retirement quote, and any time they take money out of their pension, with no more than five years between each pack, until the pension pot is empty. The new packs must include: a one-page summary of the pension; information on how to access the government’s Pension Wise service for guidance; and an explanation of the advantages of shopping around when purchasing a retirement income option (e.g. an annuity or income drawdown) and how to do this. It will also need to include a single page identifying the main risk factors relevant to these options and highlight warnings in relation to each of these risks. Jonathan Watts-Lay, director of WEALTH at work, a specialist provider of financial education and guidance in the workplace, comments: “We have seen hundreds of thousands of employees and members in our financial education seminars, who simply don’t understand how to manage their income in retirement, and we have also all heard many stories of individuals who have ended up paying huge sums in unnecessary tax, or even losing their pension to scams. “Something had to be done, and these new ‘wake-up packs’ are a good step in the right direction.”
DB scheme consolidation ACCORDING TO recent polling by the Pensions and Lifetime Savings Association (PLSA), pension experts anticipate further pension scheme consolidation and expect the number of defined benefit (DB) schemes to fall from 5,500 to below 4,000 in the next decade, with nearly half believing there could be fewer than 3,000 schemes. The results came as the Work and Pensions Select Committee called pension superfund executives to give evidence on the Pension Schemes Bill. Joe Dabrowski, head of DB, LGPS and standards, PLSA, said: “It is disappointing there are no provisions in the Pension Schemes Bill to establish a statutory authorisation regime for superfunds. Under strong governance, robust capital buffers and the appropriate affordable supervisory regime, superfunds have the potential to strengthen the security of the millions of savers in DB schemes whose sponsoring employers face an uncertain future.” Working after retirement NEW RETIREMENT trends research from Fidelity International finds that more than half (52%) of UK adults say they plan to work at least part-time during their retirement. The average age people say they expect to retire from their primary job is 66, yet 45% expect to work into their seventies, and almost one in ten (9%) into their eighties or beyond. The research also reveals: l Londoners are far more likely to have plans to continue working into their retirement (64% compared to national average of 52%), despite expecting to ‘retire’ at 65 l those with the highest household incomes (with an annual income of more than £50,000) are more likely than those on lower incomes to plan to work in their retirement (58% compared with 50%). Maike Currie, director for workplace investing at Fidelity International, said: “Retirement is no longer the cliff edge it used to be – the important thing, however, is to have choice. Whether that be to work, to retire completely, or somewhere in between, it’s important for people to hit retirement age free from money worries, and with the ability to continue the lifestyle they have become accustomed to. The solution lies in having a plan and knowing the amount they need to put away each month. This way, working in retirement can remain a choice, rather than a necessity.”
Pension savings ACCORDING TO new research (http://bit. ly/37p38NE) by the Institute and Faculty of Actuaries (IFoA), savers across the UK could be heading for a retirement that does not meet their hopes and expectations, with seventy per cent of those whose workplace pension is their main form of retirement saving, contributing only the minimum into their pension. The IFoA’s modelling concludes that an individual aiming for a ‘minimum’ income retirement target should be saving £86 per month, on average, from the start of their working life. This should be covered by the contribution they and their employer have to make under automatic enrolment. To work towards the ‘moderate’ level of income, the amount of savings required rises. To reach the full moderate income, an individual would need to save £799 a month on average over their entire working life. This represents around a quarter (26%) of earnings for someone on an average full-time salary. For a couple this would be £753 per month split between two individuals. Mark Williams, chair of the IFoA’s Pensions Board, said: “We urge the government to assess whether the current balance between the levels of employee and employer contribution is appropriate. Individuals alone should not be burdened with the responsibility of closing what could become a significant savings gap unless there is further policy reform.”
| Professional in Payroll, Pensions and Reward | December 2019 - January 2020 | Issue 56 34
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