Retirement Income 

Trott on the good, bad and complicated in pensions

Trott on the good, bad and complicated in pensions

Technical Connection's head of pensions strategy said she hopes for a "quiet life" in pensions so consumers, advisers and providers can get to grips with the changes from recent years.

Speaking to FTAdviser, Claire Trott categorised last year for the pensions industry into three brackets: the good, the bad and the complicated.

Under the good category, Ms Trott noted up to half a million small and micro employers implemented auto-enrolment in 2016.

She said: "This will have been a significant burden for some, but in the end it will be a positive move increasing significantly the number of people saving for the long term, supported by their employers.  

"The secondary annuity market appeared to be going full steam ahead for launch in 2017, well that was what the government hoped, but out of the blue this was suddenly scrapped."

Ms Trott added although there could have been many wanting to sell their annuities - around 300,000 according to the consultation - the actual value they might receive was clearly in doubt.

"Overall I feel it was the right move to close this down before any damage was done to people’s retirement income," she said.

She added that another potential change, flat rate tax relief, was mooted again but not implemented.

"I hope that this continues into the future and pensions aren’t targeted as the cash cow that they have been viewed as for the last few years," she said.

"We need some stability to try and make sense of all the change we have seen in the last 10-11 years or consumers will just fail to save for retirement at all."

In the bad category, Ms Trott said the annual allowance had been pretty dominant during 2016.

"The taper has brought a whole host of grief to advisers trying to maximise their client’s pension contributions while not over shooting the tapered annual allowance," she said.

On the Autumn Statement announcement that the money purchase annual allowance will be significantly reduced from £10,000 to £4,000 in the next tax year, 2017 – 2018, she said there will be more financial planning needed for those impacted, and help to prevent others from triggering it, if they can avoid it.

Under the complicated bracket, Ms Trott focused on the new state pension which came into effect on 6 April 2016 and although is designed to be simpler in the long run, noted that as with any change of this magnitude there would be some transitional complexities to deal with.

"Those impacted will need to review what they have built up already and what it will mean to them in the future under the new rules.

"Only those just starting to build up an entitlement in this tax year will be entirely on the new state pension regime. Those that defer taking the new state pension will also see the increases for late payment slashed to nearly half what it was before and this will no longer be able to be paid as a lump sum."

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