Pension Trustees Now to Be “Guardian Angels”
An article in the FT today suggests that new pension regulations means your pension trustees now must try to maximize your pension outcome, going beyond the call of duty as simply “trustees” and will now be “guardians”.
But, how does this match with the new “pension freedoms” and “pension flexibilities”, if your own pension trustees will decide what happens to YOUR pension funds. How does that make sense? Worse, many pension funds may delay transfers asking for more information on how your funds will be spent and where they are going, discouraging and delaying transfers.
The new regulations mean defined contribution pension schemes (also known as money purchase schemes such as Prudential and Aviva private pensions) must demonstrate how they comply with a code of practice that came into effect in November 2013.
They must demonstrate how their approach will improve and maximize returns for members. This adds more responsibilities to trustees at a time when all the options “at retirement” have increased and rules have become more complicated. Will purchasing a house at the top of a bubble “maximize returns”? How about allowing full encashment?
The rules are nonsense.
Automated Transfers to Allow Portable Pensions Announced
The same day, the Department for Work and Pensions have announced that the “pot follows member” auto enrollment scheme will come into effect. Defined contributions will be made automatically. Instead of a single point of data, there will be a “network of register operators” for security. It also allows for more flexibility in differing areas of the pensions market.
Members will just need to provide:
- their first initial and surname
- date of birth
- national insurance number
- employer that the pension pot was accumulated with
- pension scheme tax identifier number, and
- pot identifier or reference number.
This is great news and means less lost pension pots and people will now be able to track their pots better. Now, if they can choose exactly where they can invest, we are onto something, perhaps using robo-advisers to determine risk and outcome.
The Financial Crisis Has Led to People Saving More
There is some indication that those approaching retirement are saving more. Prudential’s most recent research suggests that expected retirement income has reached a six-year high.
The research shows that those who are planning to retire this year have an average expected annual retirement income of £17,000 a year, on average more than £1,200 higher than last year’s retirees.
Savers Aren’t Taking Enough Risk Early On in Life
On average, Brits are saving £238 per month for their retirement.
If this were invested into a balanced portfolio over a 45 year working life it could achieve approximately £510,000 at retirement age, but if the same amount were invested into a cautious portfolio over 45 years, the projected returns reduced by £370,000.
In other words, 20 year olds are selling themselves short of 140,000 Pounds in retirement by being cautious early on. The time to be cautious is near retirement at 60+.
If you need help with pension advice, drop us a line at http://www.qropsspecialists.com/contact-us/Latest Pension Freedom News by Richard Malpass