Start early to plan for retirement.

We live in a time when the state pension age is increasing, the number of DB (Defined Benefit) Pension Schemes open to new members is decreasing, and more and more individuals will rely on DC (Defined Contribution) Pension Schemes in their retirement.

As a result of Auto Enrolment, it’s true to say the more people than ever are saving for their retirement. But the question is, will it be enough? For some, saving for retirement is at the bottom of their “to do” list.  Even if it’s on their agenda, they may not be in a position to save as much as they would like.

A question I am often asked is “How much do I need to contribute?” Of course, the answer to that is another question, “What sort of life style do you want in retirement?”  And the answer to that can range from “I don’t know” to “I don’t want to change my life style from what I have at present”.

Yes, we can make an educated guess, using assumed growth rates and assumed life styles. But that’s what the are – Assumed!

The best answer is generally, start early, ie in your teens or twenties and give yourself plenty of time to build up a substantial pension fund.  Apologies to those of you who have just missed those age groups.   But maybe you could encourage your children to start early.  Trouble is when you’re a teenager, you’re never going to get old, are you?

Remember, it’s not “the timing of the market”, it’s the “time in the market”.

Pension cold-calling ban to be in place ‘by June’

A ban on pension cold-calling will be put into law by June this year after the government introduced amendments to the Financial Guidance and Claims Bill.

The Bill, due to reach the House of Commons report stage on Monday 12 March, now includes a cold-calling ban and pension guidance provision.

The Work and Pensions Committeesaid the amendments brought the Bill into line with its recommendations designed to protect pensioners against scams and boost the take-up of free independent pensions guidance

Committee chair Frank Field said: “The government is now almost there, within spitting distance of what the committee proposed. I am delighted that they will be bringing forward a ban on pensions cold calling by June, as we called for.

“This represents a major leap forward in the urgent fight to protect pensioners’ savings against scams and sharp practice.”

He added: “On pension guidance, the government has moved much closer to the committee’s aspiration that the taking of independent expert guidance should be the default course of action when accessing a pension pot.

“The government can now give even greater reassurance by explicitly specifying on the face of the Bill, rather than in an explanatory memo, that the public guidance body will be the sole source of the ‘appropriate pensions guidance’.

“Guidance must come from independent and impartial experts, rather than from self-interested pension providers, if individuals are to make the best use of their savings.”

Expert guidance

Under the amendments, pension schemes will be required to ensure people seeking to access their pension are “referred to appropriate pensions guidance” and “has either received appropriate pensions guidance or has opted out of receiving such guidance”.

No reference to independent financial advice is included in the amendments, however.

The Work and Pensions Committee said it was “to ensure that clients are to be directed towards the independent guidance service”.

It added: “The explanatory statement to these amendments indicates the government’s intention that this guidance will be provided by the new Single Financial Guidance Body.”

An additional amendment makes it clear that the FCA’s rules should make provision about how individuals are to indicate that they have received guidance or expressly opted out.


The above is a copy of an Article from “Professional Adviser” dated 6th March 2018


MPs target Auditors as Company Pensions collapse

The work and pensions select committee wants the government to tighten the net around auditors and their role in company pensions collapses in its upcoming paper on defined benefit (DB) schemes.

Labour MP Frank Field told FTAdviser that the document, expected to be published in the spring, should have a look on “what is the duty of auditors of companies, should that also encompass the state of the pension fund, [and] what sort of warning notices should auditors be making on this front”.

This is a view shared by other members of the committee, such as Scottish National Party MP Chris Stephens.

The Department of Work & Pensions (DWP) has been working on its white paper on DB schemes, which was first expected to be published in 2017, then delayed to February 2018, and it is now expected before the summer.

The paper, which follows a consultation launched in February into what needed to be done to ensure confidence and secure the future of these schemes, will consider the need to adapt the regulatory regime.

The role of auditors came to light in the case of the collapse of Carillion, as KPMG signed off the accounts of the contractor in March 2017.

After unsuccessful talks with its lenders and the UK government, Carillion made an application on 15 January to the High Court for compulsory liquidation.

Mr Field said: “A particular aspect arises with that company [Carillion] which we are concerned about, which is namely how can the accountancy firms sign off suggesting that the company is a going concern, when months later it collapses.”

A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.

Mr Field also wants to clarify if auditors, when they are making that judgment about a going concern for the coming year, “shouldn’t they take into account what is happening on the pension funds – whether that is coming out of control, or if that should be noted in their report when they are signing off the accounts”.

Don’t request pension transfer values before speaking to a financial adviser.

A number of cautionary notes have been flagged up in the Technical Press warning members of Defined Benefit Pension Schemes (Final Salary Schemes) not to request pension transfer values before speaking to a financial adviser.

Members of Schemes are being warned that there is a risk that individuals “get blindsided by a big number” when they get a cash equivalent transfer value (CETV) from their defined benefit (DB) scheme.

The advice is, “The first thing they should do is to talk to a financial adviser to see if a transfer is appropriate for their situation.”

Following the introduction of pension freedoms in 2015, the volume of defined benefit pension transfers has been soaring, as savers seek to take advantage of sky-high transfer values and move their nest eggs into defined contribution schemes in order to access their cash.

Figures published last year by Mercer, the Pension Administrators,  showed that as much as £50 billion has been pulled from Final Salary Pension Schemes in the previous two years.

Transfer is not always the best option.  Beware!