Retirement Income  

Hargreaves' McPhail on implosion of the annuity market

Hargreaves' McPhail on implosion of the annuity market

2016 may have matched the high bar set by 2015 in terms of disruption to pensions, Tom McPhail has said.

Speaking to FTAdviser, the head of retirement policy at Hargreaves Lansdown said HM Treasury concluded its review of pension taxation and sprang the Lifetime Isa on the industry, announcing no plans to change the structure of pensions.

Meanwhile in the Autumn Statement, the government proposed cutting the money purchase annual allowance from £10,000 to £4,000 and there is a widespread expectation further cuts to pension tax breaks are inevitable.

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Mr McPhail added the government also abandoned plans to introduce a market for selling second-hand annuities, in response to widespread concern it would lead to consumer detriment. 

He said: "The Department for Work & Pensions responded to concerns about the strength and security of master trusts with a pensions bill, which will also introduce a ban on exit penalties for defined contribution occupational schemes.

"A similar ban has now been introduced by the Financial Conduct Authority in respect of contract-based pensions. The DWP also got itself a new pensions minister in the form of Richard Harrington MP.

"In stark contrast to his immediate predecessor, Mr Harrington started his job knowing very little about pensions but quite a lot about working within the party machine; it will be interesting to see whether this proves more effective."

Mr McPhail added on behalf of the Department for Work & Pensions, John Cridland has launched a review of state pension ages, with his interim report setting out the scale and complexity of any reform possibilities, the final recommendations of which will be published in 2017.

Additionally, a number of politicians and think tanks have called into question the future of the state pension triple lock.

Mr McPhail said: "The chancellor reiterated his support for the policy as far as 2020 but it’s hard to see it lasting long after that.

"The DWP select committee has had a busy time, with investigations into intergenerational fairness, self-employment and the gig economy, final salary scheme regulation, and into the collapse of BHS.

"This latter inquiry produced one of most compelling spectator events of the year as Sir Philip Green went toe-to-toe with the Committee in a marathon evidence session which included the memorable line “stop staring at me”.

"As well as BHS, the Tata Steel pension saga dominated the headlines, at one stage opening the possibility of setting a precedent on cutting member benefits."

Mr McPhail added the Financial Conduct Authority and HM Treasury produced their wide-ranging final report on the Financial Advice Market Review, with 28 recommendations.

"The implementation is still a work in progress but already we’ve seen steps towards a simper definition of advice and guidance, streamlined advice, the launch of a pensions dashboard, greater transparency around the Financial Services Compensation Scheme and Financial Ombudsman Service, and help on financial engagement through the workplace.