This was another year of evolution rather than revolution in pensions. Between January and July we were dusting ourselves off seemingly post-pandemic, from August to November we were ‘getting back to normal’ and we spent December rewinding it all.
Legislative changes were minimal, despite the government’s increasing tax bill, and regulatory changes were also rather thin on the ground as the Financial Conduct Authority played Covid catch-up along with everyone else.
The regulator started off well in January with the release of its defined benefit advice assessment tool, which allows advisers to assess their advice in this area using the FCA’s parameters.
This is a very useful piece of guidance; the only problem is that the number of businesses able to offer this advice is getting smaller by the day as professional indemnity insurance restrictions continue to bite.
In February, the Professional Finance Society launched its vulnerability task force, showing that the industry can be proactive about consumer issues.
Vulnerability is a key theme for the regulator, and the problem has unfortunately worsened due to Covid-19 and the need for some people to access their pensions earlier than expected.
It is encouraging therefore to see an initiative that goes beyond regulatory compliance and focuses on the needs of our clients.
The only legislative change of note came in the March Budget, in the form of the freeze on the lifetime allowance.
Given the government’s need for cash, this was probably less of a hit than we expected, but it will of course result in an increasing number of people facing a penalty for having a good saving habit and/or strong investment growth.
Advice in this area is far from straightforward, and specialist help will be very valuable for those individuals who are affected.
In July the regulator repeated its concerns about ongoing advice, noting in its annual report on the retail intermediary market that 61 per cent of adviser revenue comes from ongoing rather than transactional charges.
Those of us who were around prior to the Retail Distribution Review may remember that this was this was seen as a desirable outcome, however now it is seen as a sign that clients may be paying for services they do not need.
Fortunately, many clients who experienced a first-hand demonstration of capacity for loss during 2020 have a new-found appreciation of the value that advisers deliver, by managing long-term expectations and avoiding knee-jerk decision making, particularly where income payments are concerned.
July also saw confirmation of the proposed changes to the minimum pension age, along with the usual convoluted proposals for transitional protection.
Much time was spent investigating scheme rules and considering transfers until the government put a stop to it by closing the 'window' in November.
There was a return to live conferences from September, and the opportunity to network and to learn from other advisers was welcomed by many. It was clear from this that that the profession has not stayed still during lockdown.
Although some of the traditional technical sessions are still included on conference agendas, there continues to be a greater focus on the more practical issues of running an advice business.
Technology is of course a major theme, along with behavioural management and the self-limiting nature of advising ageing clients.
Retirement planning is becoming less focused on pensions and more about creating tax-efficient and sustainable cash flow, using the full range of a client’s savings and investments.
Environmental, social and governance factors were another continuing theme. The FCA has updated its ESG strategy, making it clear that ESG must be a key consideration in the design and management of investments.
In practice, this means that every client should now receive a more ESG-friendly strategy, even those without specific preferences.
The autumn Budget was also light on pensions, but it did confirm top-up payments for those in net pay schemes and a change to the Scheme Pays deadline.
More controversially, the government confirmed a "temporary change" to the triple-lock rules, which was probably justified, but this increases the chances of a more permanent change in future.
And so, back to Covid. The gradual return to face-to-face meetings has come to an abrupt halt in the face of the Omicron variant and we are once more reliant on Zoom etc for client interaction.
This is undoubtedly a disappointment, but it is probably worth remembering that video meetings do have their advantages. They free up travel time, save costs and contribute positively to our ESG score.
I still hope for a return to more normal working in 2022, but cannot regret some of the changes forced on us in 2020-21.
Fiona Tait is technical director at Intelligent Pensions
