I think you get the picture - nothing is sacrosanct. While the public sector DB battle is yet to be had, the corporate world could be used as a lever to harmonise pensions. Imagine the kudos the Government would gain from implementing a mechanism to fund a matching amount for those below the lower earnings level for AE pensions (for example, 10p/50p or £1:£1 up to an agreed limit of say £5-10,000) and you can see how the social conscience can be eased.
Imagine the low matching levels, limiting the higher paid ‘fat cat pension’ stories as in a world of no tax relief, the argument would be that such people will always be aware and therefore responsible for funding their own pensions. A significant £billion saving and an egalitarian win.
Taking it a different way, perhaps it is about time pensions were modernised and made simple as then more people would understand them and view them as savings rather than as pensions. We all like to have savings but perhaps for most a pension is a luxury. With AE pensions ‘saving’ will become routine, if not a luxury, as long as it is easy to do. With high opt in rates and potentially high opt out rates in SME and micro employers, it is likely that compulsion is on its way either way.
So what can advisers offer to corporate clients today?
Enough crystal ball gazing; what can actually be done? Let’s start with pensions. With the threat over higher rate tax relief, there is a massive opportunity to do high-net-worth financial planning before April, and probably before the March budget, in case any changes take immediate effect. Aligned with this is the reduction in the lifetime allowance to £1m so many more people will be affected. The reduction in the lifetime allowance affects protection too with Excepted group life schemes and Relevant Life policies offering protection against the loss of enhanced/fixed protection.
There is an advice gap here; the employer or pension trustee does not know the pension situation of its high-net worth population and so employers need help to get a clear strategy agreed. These range from telling everyone who is potentially affected by the change what is happening (and align this with information on the possible reduction in higher-rate tax) and confirm they need personal advice. Alternatively offering 1:1 advice or group workshops is a real employee benefit and in both examples an organisation has made things clear for the highest paid.
