Pensions World

2012 will be an incredibly busy year in pensions, culminating in the introduction of automatic enrolment, which for the largest employers will be compulsory from October.  Several announcements from the government are expected over the next few weeks, including confirmation of the delayed ‘staging dates’ when smaller employers will have to comply with automatic enrolment. 

There is also the issue of ’small pots’, where the government is trying to avoid individuals ending up with a large number of very small pensions.  Solutions being considered include automatic transfer of pensions when individuals change jobs and having an ‘aggregator’ pension scheme specially designed for small transfers.  The consultation on this ends on 23 March, and we expect a Government response in the summer.

On 6 April, the Lifetime Allowance, which limits the amount available from pensions without suffering high tax charges, reduces from £1.8m to £1.5m.  However, those affected by this can apply for Fixed Protection.  This will allow them to retain a Lifetime Allowance of £1.8m, but only if they stop building up their pension.  Individuals looking to do this will have to apply for Fixed Protection by 5 April. 
   
Significant changes are also expected in the way pensions are dealt with at the point of retirement.  The Government is concerned that many people do not shop around for their annuities, and the Association of British Insurers is consulting on a new code of conduct to encourage more active choices by consumers.  The code is expected to be published in March.

The end of 2012 will see implementation of the Retail Distribution Review, which will mean the end of commission payments to financial advisers.  Instead, advisers will agree an appropriate charge for their services with clients, though it will still be possible for the clients to pay this charge through their pensions.  This will make pensions much more transparent than in the past, but may also lead to a significant reduction in the stakeholder pension market because it will not be possible for the adviser to be remunerated by a lump sum from the pension.  

Finally, given the current strain on our public finances we will be watching the Budget on 21 March with particular interest to see whether any further tightening of the national purse-strings has an impact on pension planning.

It is certainly going to be an interesting year for the industry as a whole.