Examination of the landscape with retirement planning

To the surprise of many, especially in the economic planning world, George Osborne announced in his 2014 budget, what should become known as pension freedom. This meant first

Pensions for pensions have typically been free of inheritance tax (according to). As such, personal pension or sipp funds are in the same way free of death. The ultimate recipient would pay taxes to their marginal rate on any drawings from the fund.

Pensions Freedom changed the proposal and the income model for many advisers. The Baby Boomer Generation had long been the client’s sweet place for them. In 2015, when pensions Freedom was law, the rumps of counselor clients were on or approaching retirement. The 1% development model is largely the norm for many.

In addition to the ability to remain invested while enjoying an income, the idea of ​​passing the fund at death was a huge benefit to a lot of wealthy or clients with high network. Wise financial planners advised their clients to withdraw from their ISAs and GIAs to retirement income while leaving their pension until the end, considering the exemption.

Annuity, especially with higher bond yield appears to be a very attractive option now

This changed dramatically in Chancellor Rachel Reeves’ 2024 autumn budget. Pension benefits would be responsible for in 2027. Some financial advisers and providers have paid tribute to the change and say pensions are for pension income. This is a weird statement of two counts:

• Financial planning must be based on legislation and not on someone’s political views. The legislation has been clear since 2015 and advisers have acted accordingly.
• Reeves’ tax change is vicious. Most inheriters who add a pension benefit to the existing income pay a cumulative tax of 62% or 67% on this income. Recipients of estates of over £ 3m could pay over 90%. £ 3m is not super rich if you have a house, a pension fund and an investment portfolio plus chattels.

First, I will not give Sipp contributions further. There is simply no meaning. Of course, that can never happen – Sir Steve Webb does not believe because of the complexity of administration of estates. I hope he’s right.

In addition, the proposed legislation will have a significant influence on adviser-fee models and proposals. Annuity, especially with higher bond yield, seems to be a very attractive option now. We know from research that the majority would choose a pension in the form of guaranteed income for life over a fund – unless it is called an annuity!

Reeves’ budget and consumer obligation should certainly lead to a significant increase in annuity, resulting in a hit on counseling fees.

Another change in pension supply will also affect IFAs – if it happens. Royal Mail launched the first CDC scheme (collective defined contribution) on October 7 last year.

Not everyone in the industry thinks CDCs are the solution to all our evil

The government is a fan. The then Minister of Pension, Emma Reynolds, said: “CDC schemes are an important addition to the British pension landscape, and when they are well designed and well run, they have the potential to improve pension results for millions of savors in the future.”

CDC scheme members benefit from collective life and collective investment (for institutional rather than retail costs). I have to add that not everyone in the industry thinks CDCs are the solution to all our evil!

However, should they succeed, the traditional benefit consultant will regain some of the business lost to advisers with the death of defined benefit schemes and the increase in the draw.

‘Peak AGE’ for prioritizing pension counseling is 55, SJP Finder

I will briefly mention one last change that we really need to look across the pension landscape – a emphasis on women’s pensions. Some interesting but troubling facts:

• 85% of women die as widows.
• 85% of annuity is a single life.
• The average woman is on the way to receive £ 12,000 per day. Years of income, compared to the average man on the field to receive £ 17k.

In short, women are mapped on pensions. Anecdotally, advisers see the man in a family, leaving women uninformed and something ignorant.

Usually the woman is the survivor – the last stop before inheritance. As a widower, I know what it means, from ensuring that your will is up to date with making a list of contact information (including your financial adviser!).

So my last message is: Make sure the women in your customer base are fully involved; Make sure their pensions are treated as important as the man’s; And think how to get the retirement message for more women in your community.

Clive Waller is CEO of CWC Research