The two meetings addressed Thucydides’ question “The secret to happiness is freedom, isn’t it”
The two meetings addressed Thucydides’ question “The secret to happiness is freedom, isn’t it” and by and large both sessions suggested that most people in the room were happy because of the pension freedoms.
However, there were misgivings; the meetings noted that since 2015 the public have become Do It Yourself actuaries and prefer to drawdown as pleases them without much regard for the tax consequences of what they are doing or for the long-term cashflow considerations of drawing too hard too early.
It has been noted that Tax Free Cash was being used to buy cars, renovate houses, clearing debts and helping out the children. One delegate noted that children were putting pressure on their parents to use TFC to put down deposits on their houses.
The groups heard that a firm found their customers concerned by
- a complex web of taxation
- hidden and opaque fees
- political involvement
- pension scams
Some of the delegates took issue with challenging the assertion that drawdown was the default and pointing to the number of clients who choose to annuitise, drawdown all their money at once or leave their money in the pension.
There was pushback on the provider for not making cash in a pension as accessible as cash in a bank account, one group thought that if people saw their pensions as ready sources of cash the numbers cashing out in one go would drop. Quilter confirmed that by early 2020 there would be enhancements to the customer’s experience that would make this easier.
The FCA was in the room for one of the sessions and both groups discussed COBS9.3 in designing solutions for clients. The general conclusion was that the public would need to become more pension savvy for a lasting solution to the problems of poor at retirement decision making were to be solved.
Off the topic of drawdown, there was discussion of various FCA publications amounting to 293 pages in one hit! CP19/25, the policy paper following the Retirement Outcomes Review and the study of Effective competition in non-workplace pensions were discussed.
Finally both groups discussed the taxation landscape as it impacted pension advice. This focused on
- The tapered annual allowance
- Tax on withdrawals
- Emergency tax on withdrawals
- Money Purchase Annual Allowance
- Death Benefits
Three steps to continue the conversation were established
- We should consider the implications of drawdown being the new default
- The regulatory journey is just beginning, where will it take us?
- How can advisers mitigate the risks of clients making catastrophic mistakes in their retirement decision making?
Expert: Russell Bignall – Old Mutual Wealth
Facilitator: Henry Tapper – Age Wage