STATE OF THE NATION PENSION CHALLENGES AND OPPORTUNITIES IN 2017 - - PowerPoint PPT Presentation

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STATE OF THE NATION PENSION CHALLENGES AND OPPORTUNITIES IN 2017 - - PowerPoint PPT Presentation

Oct 16, 2022 336 likes •725 views

STATE OF THE NATION PENSION CHALLENGES AND OPPORTUNITIES IN 2017 This is for financial adviser use only and shouldnt be relied upon by any other person. STATE OF THE NATION AGENDA State pensions Pension freedoms Automatic

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This is for financial adviser use only and shouldn’t be relied upon by any other person.

STATE OF THE NATION

PENSION CHALLENGES AND OPPORTUNITIES IN 2017

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STATE OF THE NATION

  • State pensions
  • Pension freedoms
  • Automatic enrolment
  • Pensions & D-i-v-o-r-c-e
  • Rise of the ISAs
  • Budget predictions…

AGENDA

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STATE OF THE NATION

STATE PENSIONS

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STATE OF THE NATION STATE PENSIONS

100 200 300 400 500 600

2016/17 2021/22 2027/28 2037/38 2047/48 2057/58 2067/68

Total State Pensions All pensions + housing/DLA/PIP/AA £496 billion £440 billion

Source: DWP

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STATE OF THE NATION STATE PENSIONS

Foundation amount

Source: The pension advisory service, April 2017

Total £159.55 p.w. Current entitlement Notional STP entitlement Future entitlement BSP Graduated pension SERPS S2P NI NI NI NI NI NI NI NI NI NI NI NI Delay Delay Delay

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STATE OF THE NATION

  • Changes in criteria:
  • Minimum contribution years:
  • NI record to get full pension:
  • Defferal:

STATE PENSIONS

1 year to 10 years 30 years to 35 years 5 weeks/10.4% p.a. to 9 weeks/5.8% p.a.

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STATE OF THE NATION STATE PENSIONS Recommendations

Increase State Pension Age to 68 Accelerated timetable 2044 to 2037 Scrap the ‘triple lock’

✓  ✓ ✓

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STATE OF THE NATION STATE PENSIONS

1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960

60 66 61 62 63 64 65 Year of Birth SPA

Men Women

WASPI

Women Against State Pension Inequality

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STATE OF THE NATION Planning points:

  • Changing goalposts will

drive advice

  • Class 3 NICs useful for

some STATE PENSIONS

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STATE OF THE NATION

PENSION FREEDOMS

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STATE OF THE NATION PENSION FREEDOMS

Source: Citizen’s Advice Life after Pension Choices August 2016

29%

  • f total

32%

  • f >£100K+

Figure 2: How consumers plan to spend their pension savings

Putting it in the bank:

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STATE OF THE NATION PENSION FREEDOMS Planning points:

  • Timing and taxation of withdrawals
  • Sustainability
  • Transfer advice
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STATE OF THE NATION

AUTOMATIC ENROLMENT

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STATE OF THE NATION AUTOMATIC ENROLMENT

1 2 3 4 5 6 7 8 9 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Millions Eligible jobholders automatically enrolled into an automatic enrolment scheme

Source: The Pension Regulator, Declaration of Compliance Monthly Report, August 2017.

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STATE OF THE NATION AUTOMATIC ENROLMENT

Source: The Pension Regulator

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STATE OF THE NATION AUTOMATIC ENROLMENT Govt review: our response

  • Contribution rates – must go up!
  • Self-employed participation
  • Net pay arrangement schemes
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STATE OF THE NATION AUTOMATIC ENROLMENT Planning points:

  • Employers still need help!
  • Scheme reviews
  • Self-employed
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STATE OF THE NATION

PENSIONS & D-I-V-O-R-C-E

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30,000 50,000 70,000 90,000 110,000 130,000 150,000 170,000 1990 1995 2000 2005 2010 2015 Total Wife Husband Number of opposite sex couples divorcing: On petition of/Party to whom granted, all decrees

Source: ONS

STATE OF THE NATION PENSIONS & DIVORCE

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Source: ONS

Divorces of opposite sex couples: Men and Women age 60 and over 8,000 10,000 12,000 14,000 16,000 18,000 1985 1990 1995 2000 2005 2010 2015

STATE OF THE NATION PENSIONS & DIVORCE

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WS v WS H: SIPP/Money Puchase – CEV £970,696 W: DB – CEB £3,064,154 Both pensions in payment Wanted to avoid a pension sharing order as this “would take the husband well over the lifetime allowance with severe taxation consequences.” Judge decided to use Duxbury calculation to determine the

  • ffsetting amount - £425,000.

Source: Family Law Week: WS v WS [2015] EWHC 3941 (Fam) http://www.familylawweek.co.uk/site.aspx?i=ed158758

STATE OF THE NATION PENSIONS & DIVORCE

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Husband’s Sipp £970,696 Wife’s DB £3,064,154 TOTAL £4,034,850 Divide by 2 £2,017,425 Possible share £3,064,154

  • £2,017,154

£1,046,729

£621,729 more than the amount awarded!

Figures shown are for illustrative purposes only.

STATE OF THE NATION PENSIONS & DIVORCE

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Planning points:

  • Divorcees need help!
  • Solicitors need help!
  • A growing and potentially lucrative

market… STATE OF THE NATION PENSIONS & DIVORCE

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STATE OF THE NATION PENSIONS & DIVORCE

“Nearly one quarter of a million people face divorce in the UK each year, with the majority needing financial assistance. Yet there are just 42 accredited financial adviser specialists in family law – that’s one adviser for every 5,000 people.”

Source: Resolution with the Personal Finance Society “Unlock the divorce and separation market”

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STATE OF THE NATION PENSIONS & DIVORCE

“Financial Adviser Specialist Accreditation is open to associate members of Resolution who hold a QCF Level 4 plus AF3/G60 and a valid Statement of Professional Standing (SPS).”

Source: Resolution with the Personal Finance Society “Unlock the divorce and separation market” http://www.resolution.org.uk/editorial.asp?page_id=1013

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STATE OF THE NATION

RISE OF THE ISAS

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STATE OF THE NATION RISE OF THE ISAS

50 100 150 200 250 300 Pensions Annual Allowance (excluding taper) Adult ISA Subscription Limits

Source: HMRC: Individual Savings Account (ISA) Statistics, April 2017 & Royal London

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50 100 150 200 250 300 Pensions Annual Allowance (excluding taper, including MPAA) Adult ISA Subscription Limits

STATE OF THE NATION RISE OF THE ISAS

Source: HMRC: Individual Savings Account (ISA) Statistics, April 2017 & Royal London

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STATE OF THE NATION RISE OF THE ISAS

Cash ISA Stocks & shares ISA J

unior ISA

Help to buy ISA F

Innovative inance ISA

P

ensions ISA

Lifetime ISA

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LISA

Junior ISA Help to Buy: ISA Lifetime ISA Cash ISA Stocks and Shares ISA Lifetime ISA

Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/579862 /Savings_product_infographic_Christmas_2016_v7.pdf

Premium Bond

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£4K STATE OF THE NATION RISE OF THE ISAS 18-40 25% LISA

50

LISA LISA

Source: HMRC, Lifetime ISA: updated design note

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LISA

After 12 months, first UK home up to £450K From age 60

60

Terminal ill-health (<12 months to live) LISA to LISA transfer Full withdrawals tax and penalty free if: Otherwise a 25% charge will apply

Source: HMRC, Lifetime ISA: updated design note

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STATE OF THE NATION RISE OF THE ISAS Our view:

  • LISA is a welcome alternative savings option
  • It may not be suitable for retirement savings:

Access penalty Investment structure Phased withdrawal

  • Combination of plans likely to be useful
  • ption
  • Continued need for quality financial advice
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STATE OF THE NATION

BUDGET PREDICTIONS

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STATE OF THE NATION BUDGET PREDICTIONS…

5 4 3 2 1

Tax-free cash Employer NICs LTA Tapered AA AA

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  • 1. AA
  • 2. Tapered AA
  • 3. LTA
  • 4. Employer NI
  • 5. PCLS