“Though mandatory contributions have gone a long way in helping people plan for their retirement – and we would like to see contributions increase further to 12% and possibly beyond through a phased strategic approach – contribution levels are only one half of the picture. Paying closer attention to the performance of scheme default funds is an essential part of ensuring employees are properly prepared for retirement. Additionally, if the aim of Auto Enrolment is to achieve appropriate financial resilience for employees and their families in retirement, it is unlikely to be achieved through contribution increases alone, which can be burdensome for smaller businesses and unaffordable for individuals.”
Given the impact that investment performance has on the fund value over the longer-term and the discrepancy that exists between default propositions, TISA believes there needs to be more focus placed in this area.
Renny Biggins added :
“We would like to see providers, employers and financial advisers adopt a more holistic approach when selecting a default fund. Transparency of scheme default fund performance is key and whilst costs and charges are of course an important factor, the market is creating additional constraints over and above the charge cap with an over-emphasis placed on cost in isolation.”
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Tens of thousands entering retirement without ever taking advice each year 6 June 2019
New analysis from the Association of British Insurers (ABI) reveals alarmingly low levels of retirement readiness – putting a lifetime of saving at risk.
The analysis found that more than 62,000 people accessed some of their pension for the first time during a six-month period last year, but 34% haven’t taken any form of financial advice. This worrying trend is echoed by the FCA who found that 91% of UK adults did not receive any financial advice in a 12-month period.
Advice is widely considered to be financially out of reach for most, which may explain why 21,000 people accessing a record-average pot size of £120,000 did so without ever having spoken to a financial adviser.
By doing so, thousands of retirees each month run the risk of making dangerous decisions about what to do with the large sums of cash they suddenly have access to, which could eventually lead to them running out of money too early and having to fall back on family members or the state just to cover expenses and the cost of living.
In light of these concerns the ABI recently published two communications guidance documents at its annual Long- Term Savings Conference.
1. The first document, ‘ Tailored Risk Warnings’, focuses on raising awareness of the risks that consumers face at different ages as they approach retirement. It recommends that customers receive three different forms of risk warnings at ages 50, then 55 to 70, and then at age 75. The different warnings cover scams and contributions for the younger groups, and then tax, life expectancy and power of attorney risks for the older groups – for example. 2. The second document, ‘ Communications Through the Lifecourse’ focuses on the opportunities during different stages of the customer’s life. It highlights the need to speak to new 18-25 year olds differently to other age groups, in the same way that adults in their 50s will need to receive different messages as they draw closer to their retirement. By tailoring the messages they receive, firms should be giving consumer more confidence to make smart decisions about their future, based on the stage they’re currently at in their saving.
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The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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