2nd April 2013
It is seven years on since pensions were simplified or at least that was the theory. However a survey by unbiased.co.uk has found that 83 per cent of financial advisers believe the system is now more complicated than it was when it was reformed in 2006.
Part of the problem has been that since simplification, there have been more and more changes. Some of them have been welcomed by investors such as the decision to reform compulsory annuitisation. However cuts to the overall amount you can save in a pension in a lifetime and in a year have proved less popular.
It is not surprising that 33 per cent of advisers believe that cutting the annual pension which is currently £50,000 but due to fall to £45,000 has damaged pension saving most. Half of advisers want the Government to leave pensions alone for the next five years.
Some 26 per cent advisers believe that A-day simplification itself has damaged pension saving. Some 18 per cent say the decreasing the lifetime pension tax-free allowance currently 1.25m but due to fall is to blame. One in ten financial advisers (10%) said scrapping the default retirement age of 65 has had the biggest negative effect suggesting that some people may be aiming to work longer.
|Decreasing the annual pension tax-free allowance||33%|
|Decreasing the lifetime pension tax-free allowance||18%|
|Scrapping the default retirement age of 65||10%|
|Creating a flat rate state pension||8%|
Despite current poor annuity rates, 66 per cent of financial advisers still believe that a pension is a good method of funding retirement, while 28 per cent say they would recommend ISAs as an alternative method of pension saving.
The main objection financial advisers say they face from clients about retirement planning is loss of confidence in pensions (60 per cent) while 17 per cent said clients were put off due to poor annuity rates and a further 15 per cent said it was due to a lack of disposable income.
Some 26 per cent of financial advisers think that retirement planning should be included in financial education in the national curriculum and 21 per cent think that businesses should offer employees retirement planning advice from a financial adviser, as part of their benefits package.
Karen Barrett, Chief Executive at unbiased.co.uk says: “The UK pension system has dramatically changed over the last few years; with different Governments come different ideas and it’s unlikely that this will cease. What’s clear is that relying on the state will not provide you with a comfortable retirement and the trend of moving the responsibility of the funding of retirement from state to individual is one that is sure to continue.
“People saving for retirement need to make their own provisions and decisions based on their own financial circumstances. But you don’t need to be an expert in retirement planning yourself – that is what professional financial advisers are there for. Of the nearly 500,000 searches going through our ‘find a professional adviser’ search every year, the top area people have sought advice on has consistently been retirement planning, clearly highlighting just how important this area is.”