For SMEs and high net worth individuals, the historical popularity of Ssas/EPP and more latterly Sipps have provided a great niche area with some amazing business benefits, for example, the ability to buy commercial property.
While we have lost the commission element on pensions, even the fee based work on things such as Sipps may be under threat if the consultation over the combined Isa/pension tax regime is merged, especially if this is contribution limited.
For advisers, either in the market or wanting to get into it, AE represents a genuine opportunity to engage with corporate clients noting that the number going through the process has increased from an estimate in 2012 of 1.277m employers needing to comply to the Pensions Regulator saying in 2015 that the number has risen to 1.8m companies.
Of these, 7 out of 10 say they will ask a business adviser for help and so the opportunity to start the conversation is there as employers seek compliance. More challenging is how to make money out of the opportunity as our research showed that most micro employers will not pay fees to get AE done. ‘Massive opportunity, revenue challenge’ is how I would summarise AE.
In no way am I writing off pensions or their importance. But with the overall lack of consultation on pensions freedoms in 2014, I am concerned that, with pensions simplification we may end up with a world of technical legacy, such as a declining market, with a new world of no advice/no technical or taxation planning need.
Imagine a world where the government will match up to say £5,000 or £10,000 in TEE (Taxed Exempt Exempt world) or limit both contributions and the percentage of the fund that can be taken tax free until a certain date.The simplicity is incredibly attractive when aligned with the consequent tax and national insurance contributions saving.
Even the removal of higher rate tax relief now looks unlikely with a lower, single level looking to be the biggest change. This reduction begins to limit the appeal of pensions for high net worth individuals/decision makers in companies (who still have capacity in their £1m lifetime allowance which in itself may disappear) to prioritise pensions over other benefits.
