Following the admission by the Financial Conduct Authority (FCA) that the introduction of pension freedoms should have been better planned, positive steps are being taken to improve consumer protection. A cold-calling ban was introduced earlier this year; the FCA has proposed to ban contingent charging for pension transfer advice from next year.
The Association of British Insurers has called on the government to introduce additional safeguards to protect consumers. This includes an increase of the pension freedoms age from 55 to 57 and the introduction of a new pension review at 75 to further examine retirement options.
With the UK’s ageing population, longer working lives and the state pension age rising to 67 by 2028, it’s reassuring to see a reassessment of the pensions freedom situation.
Pension freedoms peak
These measures demonstrate a commitment to delivering the best protection for consumers, but there is still the risk that the freedom of choice itself leaves consumers and their savings at risk, without the right advice or a full understanding of their responsibilities.
According to FT Adviser, since pension freedoms were introduced in 2015, more than £28bn has been withdrawn from schemes , with an average of six withdrawals per person. With almost one million people reaching the age of 55 next year, this is set to create the highest level of demand for pension freedoms to date.
To be ready for this boom:
- Companies need to prepare for an ageing workforce
- Individuals need to work out their retirement plans and how to maintain their income over a longer period
- Advisers need to provide tailored solutions in response to these evolving structural developments
The role of auto enrolment
As we look at the retirement situation through a different lens, we can see that things are slowly improving. Scottish Widows retirement report for 2019 shows that 59% of Brits aged over 30 are now saving adequately for retirement, compared to 55% just 12 months ago. This shows the positive impact of auto enrolment on saving habits.
Since auto enrolment was introduced, The Pensions Regulator has issued 24,000 escalating penalty notices, 87,000 fixed penalty notices and 32,000 unpaid contribution notices. The vast majority of employers have now established a workplace pension scheme and demonstrated a commitment to meeting ongoing legal obligations.
According to Equitini, 70% more women are participating in a workplace pension since auto-enrolment. 8.7 million women are now investing into a scheme with 88% now eligible to participate and benefit from a system designed to maximise their later-life earnings.
An uphill struggle
The Scottish Widows report also highlights some less positive statistics:
- More than a fifth of UK adults say they expect they’ll never be able to afford to retire
- Three in five young people are still not saving enough to ensure a secure future into retirement
- 37% of those who are self-employed report having no pension at all
- 41% expect no income from a pension in retirement
Within our increasingly complex pensions and retirement planning landscape, it is essential to seek advice to protect yourself and your employees, and to stay on top of ongoing regulatory requirements. While many of us are naturally inclined to want to organise our finances ourselves, high-quality professional advice is invaluable.
Our wealth management specialists can identify any current or future problems, suggest solutions and provide access to leading retirement planning products. We can also assess your broader financial needs.
For more information or help from one of our wealth management specialists, please contact us using our enquiry form.
The information contained within this communication does not constitute financial advice and is provided for general information purposes only. BKL Wealth Management shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.
All wealth management advice will be provided by our affiliated FCA registered company BKL Wealth Management Limited.
BKL Wealth Management Limited is an appointed representative of Vintage Wealth Management Limited which is authorised and regulated by the Financial Conduct Authority. FCA number 593380.