Personal Pension  

State boosts personal market

The employee benefits consultant for Preston-based Taylor Patterson said while low earners would benefit from the changes, those earning more would miss out on the opportunity for top-ups.

He said: “The announcement is great for lower income earners who will benefit from a higher flat-rate pension of £144 a week.

“However, fewer people will qualify for the maximum state pension as the government has increased the minimum national insurance contribution period from 30 years to 35 years. There is also a minimum qualification period of 10 years, so anyone with less than 10 years of NI contributions, will not get a state pension.

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“Individuals on higher incomes will also lose out. Currently, higher earners can receive a state pension of up to £250 a week. After April 2017, it will be capped at £144 a week in today’s money, although they’ll be able to keep benefits accrued up to that point.”

He said individuals on high incomes should invest in a personal pension before it’s too late.

Carl Melvin, managing director of Renfrewshire-based Affluent Financial Planning, said: “A lot of retirees will not understand the implications of these changes. Anything that provides clarity to people on what the likely level of pension is from the government is a good thing because it will allow the individual to see clearly how inadequate their income will be.”

Mr Melvin said state pensions were the safest form of income but not sufficient for a full retirement, meaning an individual would need another scheme.

Meanwhile, Tony Williams, introducer recruitment manager for London-based TailorMade Independent, said more non-pension professionals such as mortgage advisers, accountants and solicitors were referring clients for potential pension transfers.

He said as a result of the RDR, many clients will find themselves without professional advice on a pension as a result of advisers turning them away or leaving the market, creating a situation whereby non-pension professionals were advising on personal pensions.

Mr Williams said: “A new scenario has emerged whereby sceptical clients are turning to other professional advisers for professional information.”

When asked if personal pensions could be heading for another mis-selling scandal as a result of these changes, Mr Melvin said: “There are risks in pensions as you are investing in the stockmarket and relying on annuity rates.

“However, the alternative is not to save for retirement at all.”


A 108-page white paper from the Department for Work and Pensions proposed removing means-testing for the vast majority of people, and offering those who will have contributed national insurance payments for at least 35 years (compared to the current threshold of 30 years), one weekly state pension payment of £144 from 2017.

Personal pensions mis-selling

In 1994/95 the financial services regulators set out a programme of reviews by authorised firms of personal pensions sold between April 1988 and June 1994. It was to identify cases where people were badly advised to opt out of, not join, or transfer funds from an occupational pension scheme in favour of a personal pension. The programme required firms to review certain categories of people most at risk from having lost out from bad advice.