This is often the case when trying to get information from pension providers or arranging a transfer. But the same can be said of pensions policy: nothing happens quickly.
So looking ahead at what may happen in the pensions industry in 2020, I see very few things that will have an immediate impact on advisers or their clients, but I do see some policies and initiatives that will result in important changes.
In the December 2019 Queen’s Speech, the government reintroduced the pension schemes bill, and it mentioned the creation of a legislative framework to allow people to access information for most pension schemes in one place for the first time. Therefore, it seems the pensions dashboard has come one step nearer, but we are still left waiting to know when and how.
Other changes advisers must keep an eye out for include plans to ban contingent charging for defined benefit transfer advice and the introduction of investment pathways.
In addition to these, we should keep an eye on more practical matters, such as changes in the lifetime allowance and the outlook for global financial markets and the annuity market.
Pensions dashboard
There is general agreement the pensions dashboard is an important step forwards, but the devil will be in the detail. For advisers, an important issue will be adviser access.
It is good that people will be able to see all their pensions in one place, but they will need help, guidance and preferably advice if they are to take full advantage of all this information. It would be best if advisers could access their client’s pension dashboard but I do not think this will be the case at the outset.
I highlighted my concerns at a recent conference. I made the point that human nature is such that if people are shown they have access to money they will be tempted to take it.
The chairman at the conference said, in response to another question, that when the Treasury realised how much extra tax they would get from people cashing in their pensions early they would be rushing to fund it.
However, serious thought must be given as to how the information is presented.
Contingent charging for DB transfer advice
The industry is divided on the issue of contingent charging, with some high-profile advisers against and some high-profile companies for.
On the one hand, financial advice is a recognised and respectable profession. Advisers should be paid for the work they do, so why should they not charge for every hour of work they do?
On the other hand, prospective clients do not understand how the advice profession works and are used to paying by results. They are told that the new pension freedoms mean they can spend their pension in any way they wish, even if this is at odds with sensible financial norms, so they are confused as to why it is so hard to get advice if they are considering a DB transfer and why it is so expensive.
Contingent charging applied by honest and trustworthy advisers will benefit many people, but contingent charging applied by companies that should not be advisers in the first place will be harmful for people.
It is difficult for the FCA to balance these two different views, and this is an issue that will continue to be a hot potato.
Investment pathways
Investment pathways for new non-advised drawdown customers are due to be introduced in August 2020. The new pathways are for non-advised consumers, but it may impact advisers and their clients.
Customers starting a new drawdown plan without advice will be given a choice of four different pathways depending on their objectives: no plans to touch their money; set up a guaranteed annuity; start taking a drawdown income; or withdraw all their funds.
The aim is to stop people defaulting to cash and to make a sensible investment decision.
Hopefully one of the consequences of the new pathways is that people may realise they need advice on which pathway is best for them.
Lifetime allowance
The lifetime allowance will edge up from April, when it is likely to hit £1.073m.
It is only a small increase (from £1.05m) but is useful for planning purposes.
There are still many unintended consequences of the lifetime allowance, as evidenced by the problems it causes for senior medical practitioners.
The government should show more urgency in addressing these problems.
Those involved with setting pension policy will no doubt be busy working to make progress on the issues mentioned above. Those involved at the coalface of pension advice will also be working hard, but in a different way: advisers will be working to get better solutions for their existing clients and to make advice more widely available to new prospective clients.
Advisers must implement the rules and regulations passed down to them, but policy makers do not necessarily take note of the opinions that are passed up to them.
Billy Burrows is retirement director at Better Retirement
