On face value, 2019 appears to have been a quiet year for pensions, with little legislative change due to Brexit and other government issues taking centre-stage.
However, we have still seen some significant developments that are worth a mention.
The NHS Pension Scheme has been one of the hot topics of 2019, due to the tapered annual allowance and the impact this is having on the NHS and the services it can offer.
It has been widely reported that due to the extra tax charges being incurred from the tapered annual allowance, consultants have been turning down overtime and in some extreme cases retiring entirely.
The NHS scheme and the government have made various proposals throughout the year, some of which were very short-lived, such as the 50:50 proposal that was going to see many consultants without the flexibility they wanted and possibly out of pocket again.
The second consultation has now closed.
This offered a more flexible option to those affected, with the option of joining the scheme in 10 per cent tranches, as well as improvements to the Scheme Pays tax facilities.
However, as this was a consultation that would not come into play until next tax year at the earliest, offers have now been made to cover any reduction in retirement income incurred because of the use of Scheme Pays for charges incurred in this current tax year.
Some clarity on this is still required, and the British Medical Association has requested confirmation that there will not be any negative tax repercussions by accepting this offer. Watch this space.
Defined benefit transfers
The Financial Conduct Authority has continued its interest in the defined benefit pension transfer market with another consultation this year. The consultation surrounds two aspects of the process.
The first addresses the way in which advisers can charge for the advice with a focus on contingent charging and banning it in most circumstances.
The second aspect was the introduction of ‘abridged advice’ that falls between a triage service and full advice.
Triage does not allow any comment on the individuals circumstances or an indication if it may be worth considering, in fact, it would be most likely achieved by a booklet explaining what a pension transfer is.
The new process gives an adviser the opportunity to look at the client’s circumstances and, without conducting a full advice process, determine that the transfer is not likely to be suitable.
They cannot at this point state that they would recommend it if it goes to full advice, but they can offer this service outside the ban on contingent charging.
The consultation has now closed, and we await the feedback and policy statements.
It is expected that when the changes to the rules are brought in, advisers will have one week to change their processes.
Retirement Outcomes Review
This year we also saw the consultation and final rules and guidance of the second tranches of changes in relation to the Retirement Outcomes Review.
This stage of the ROR was looking at investment pathways, cash as an active investment decision, as well as costs and charges disclosure.
The investment pathways are to ensure that those who are entering drawdown without advice have access to investment portfolios/funds that are structured for their needs.
The needs are categorised by how long they plan to keep their funds invested, which include not touching the funds in the next five years, drawing the whole fund within the five years, purchasing an annuity or taking income for the long term.
There are exemptions for companies that have little or no execution-only investors, but they still require a referral process, which could just be a referral to the Money and Pensions Service drawdown comparator tool that is currently under construction but will hopefully be complete before the regulations come into force in August 2020.
What next?
We await the results of the general election as there remains much uncertainty within Westminster.
The manifestos at the time of going to press lacked detailed policy around pensions, so we are once again in a state of limbo.
I expect once Brexit is completed, we will see policy movements within the pensions space.
Claire Trott is head of pensions strategy at Technical Connection
