New Pension freedoms - Outcome of Consultation

PensionTech

Typical, all happens over lunchtime...

Snowman, I've yet to read through all the docs but the excerpt doesn't explain whether the transfer advice exemption will have an age restriction on it - it would make sense to me if it does, particularly if the reason for the exemption is the ability to use triv comm - but we'll see. Interesting to see that they're reducing the triv comm/small pots age limit to 55, but it's to be expected with the new flexibility. Does mean that I've got to go back with a new raft of triv comm letter changes though, having just signed off the last lot...

mania112

I was expecting answers, but a lot of the important points were answered with 'come back in the Autumn'.

The tax rules and the products to be on offer are still unknown.

SnowMan

PensionTech wrote: »

Typical, all happens over lunchtime...

Snowman, I've yet to read through all the docs but the excerpt doesn't explain whether the transfer advice exemption will have an age restriction on it - it would make sense to me if it does, particularly if the reason for the exemption is the ability to use triv comm - but we'll see. Interesting to see that they're reducing the triv comm/small pots age limit to 55, but it's to be expected with the new flexibility. Does mean that I've got to go back with a new raft of triv comm letter changes though, having just signed off the last lot...

I agree it isn't clear from what I can find. As I see it it all depends how you read

4.26
The proposal to make it a statutory requirement to take professional financial advice was recommended by a large number of stakeholders including the ABI and CBI. It will ensure that all pension fund members are fully informed before taking any decision, and counteract the risk that a significant number of pension scheme members act against their own best interests or are coerced out of their scheme. This requirement for professional financial advice would not apply to small pot holders with pension savings below £30,000 as the trivial commutation rules would still apply

You can read it that it is a simple £30,000, regardless of age etc, and the bit about trivial commuation is just a broad based explanation of the logic.

Or you can read it (and if I had to guess this is how I would read it) that 'small pot' specifically means a small pot qualifying for trivial commutation under the extended rules (including age rules based on age at time of transfer).

PensionTech

Ugh, I hate the fact that they've conflated the terms "small pot" and "trivial commutation"! Granted that triv comm is a defined term and small pot isn't but most of the industry uses small pot to mean commutation under the authorised payment regs and triv comm to mean, well, triv comm... it causes so many problems when our administrators mix the two up, and it's not helpful to see the Treasury do the same!

Yes, it looks to me like either they haven't considered an age limit or they've just drafted this paper quite thoughtlessly. Hopefully the legislation will be drafted to apply the exemption to people who meet the conditions for triv comm - rather creating a separate definition of people who have under £30k - so the problem won't arise. If the exemption is meant to apply to someone who'd be able to take their benefits under triv comm anyway, and the requirement for advice is meant to stop people transferring out in bulk and against their best interests, then it would be ridiculous to allow a 25yo with £10k DB savings to fly under the radar.

gadgetmind

Well, they do have a very complicated mess of old regulations to try and consider, and ideally by giving everything a bit more flexibility and not taking any away. They also need to try and treat DB holders fairly as already some of these people are complaining they will have to endure long-term, index-linked, gold-plated income.

RichandJ

Going to read it on train home. Sad, I know....

Financial_Saddler

gadgetmind wrote: »

Around 40% was the figure I last saw. It wouldn't take much education to reduce this.

The last figure I saw, for 2012, was actually 60%, of whom 80% would have had a more positive outcome with an open market quote.
Consumer inertia is a central plank of strategy in the financial industry, for the very good reason that, unfortunately, this aspect of human nature tends to be very resilient in the face of all attempts to "educate" people into making more rational financial choices.

gadgetmind

Not a great source, but ...

http://annuity-quotes.co.uk/open-market-option/

"Sadly, in 2011 just 69 percent of retirees knew of the Open Market Option. In 2012 that number dropped further with only 58 percent of retirees realising they could compare annuity quotes rather than just settling for the first one offered."

However, still a majority in both cases.

To be honest, I do hope the new freedoms make people think about their options. If some still make bad choices, well boo hoo, stupid people do stupid things. That doesn't mean that we should shackle smarter people, does it?

bmm78

http://www.fca.org.uk/static/documents/thematic-reviews/annuities-consumer-behaviour-review.pdf

The most recent ABI study has awareness of the right to shop around at 91%, and people who actually do at 63%.

Even as awareness has grown, incidence has levelled out at around two-thirds since 2010.

Obviously any surveys like this have to be treated with caution, but the report prepared for the FCA (linked above) indicates that there are some significant consumer barriers to positive outcomes. The budget changes are not going to resolve these; if anything they are going to exacerbate them as the impact of poor decisions can be much greater than defaulting into an annuity purchase.

kidmugsy

gadgetmind wrote: »

already some of these people are complaining they will have to endure long-term, index-linked, gold-plated income.

:):):):):):):):):):):):):):):):):):)