Pension reform ‘Easter eggs’

Pension reform ‘Easter eggs’

As part of our series of blogs to mark the launch of the new MyFS report on funding retirement, Stephanie Condra, Retirement Market Strategist at AXA IM, gives her thoughts on the ‘Easter eggs’ that have been hidden away in the last budget and in the upcoming pension reforms. I have Easter eggs on the mind. Not the chocolate kind, though. The Easter eggs I am referring to are the hidden messages that can be found in movies and only noticed by those ‘in the know’ (fans of Pixar movies know that characters from other films often make cameos, and fans of Fight Club have probably spotted the Starbucks cup that shows up in almost every scene). In the context of the recent budget announcement, a few of these kind of Easter eggs come to mind. First that comes to mind is the reduction in the lifetime allowance from £1.25million to £1million. As always, the message was focused on the size of the savings pot and not on the income that it could generate. For someone retiring in the next few months, after taking their 25% tax-free lump sum from a £1million pot, they would be able to purchase a single life inflation-linked annuity of about £25,000 per year. While pensioners are no longer required to buy an annuity, this figure is a helpful indication of what they could expect to receive in terms of stable and predictable income over their lifetime. The Easter egg that can be found in this announcement might be that the government has chosen £25,000 as the level of income that savers can generate...
Should pensioners get complete control of their finances? Probably not.

Should pensioners get complete control of their finances? Probably not.

In the second of our blogs on Funding Retirement, Neil Lovatt, Director at Scottish Friendly, outlines his take on the liberalisation of Britain’s pension system…   This is a difficult one to argue, but I will. The dramatic liberalisation of Britain’s pension system unveiled in the March budget, when the Chancellor abolished annuities or removed the requirement to buy one, has been labelled as one of the biggest reforms to pensions in recent years. But in fact, the requirement to purchase an annuity was abolished for most people by Kenneth Clarke in 1995 and the only remaining requirement (to buy one at age 75) was removed in 2011. Indeed the budget wasn’t even about letting people have access to their pension fund when they retire. That was already in place for those with small pots of money or those who had secured an income of at least £20,000. What the budget actually did was to simplify the confusion over pensions and give everyone largely the same rights of access to their pension fund. I should clarify that I do not oppose giving people access to their money, but I do think that it’s wrong that taxpayers should pay twice for someone’s retirement. Why should taxpayers pay for tax relief on pension funds and then have to pay for pension credits to bring someone up to the minimum income level in the event that person blows their pension fund early? Now, it would be very strange for someone that has sensibly saved all their life to suddenly become reckless in old age and I am doubtful that it will be...
All I want for Christmas…

All I want for Christmas…

In advance of tomorrow’s debate on funding retirement, we asked our panelists to give us their thoughts on the current state of play in the pension industry. First up, Stephanie Condra, Retirement market strategist at AXA IM   Dear Santa, We’ve been good. A few months into the year and investors were given the gift of pension freedom and choice. All the good girls and boys across the UK that have been diligently saving their money for retirement now have the full flexibility to choose whichever investment solution they think will give them the best outcome. I bet your elves are busy building investment models for the financial engineers and designing new income products for the asset managers on your ‘nice list’! What do you plan to put under the tree for annuity providers? As for us, this year our retirement Christmas wish list should probably be sent to the Financial Conduct Authority (FCA) or HM Treasury. I won’t ask for much this Christmas, just a few small things… A post-retirement default strategy. I finally got around to reading the book Nudge that you put in my stocking a few years ago and it got me thinking that Thaler’s principle could be applied to the pension system. The nudge principle suggests that systems should be designed to protect investors that are likely to behave irrationally, while still allowing rational investors the flexibility to choose the option that best suits their situation. This would suggest that a post-retirement default investment solution – which investors could opt out of – might address concerns about lack of pension scheme member engagement. I...
Meet our host: Declan Curry

Meet our host: Declan Curry

Our host and former BBC journalist Declan Curry, stepped into the MyFS HQ today to prepare for the upcoming debate on funding retirement. We took the opportunity to take him aside for a few minutes and have a chat…   Hi Declan, good to have you here. So tell us, what is life like now that you have left the BBC? What keeps you busy? Well, I’ve actually been freelance for many years. The BBC was my highest-profile client, of course, but was just one of many organisations that hired me to explain what’s going on in business and personal finance. At the end of the summer I decided to stop making programmes for the BBC so I could give more attention to my other clients. I had the same secret fear as every freelancer that it would all go wrong and that within a month I would be begging on the streets, but so far, so good. I’ve been busier – and luckier – than ever. What was your favourite aspect of working at the BBC? I had been working for, at or around the BBC for almost exactly 20 years. It was stimulating, hilarious and exasperating all at once and I’m continuously grateful to the Corporation for all the opportunities it offered me. It’s always fun to work with people who are much smarter than you are! Also, I was grateful to the millions of people who welcomed me into their homes each day. Some of them called me Dermot, one or two thought I was called Eamonn, but the welcome was always warm and genuine. It was always a pleasure to meet viewers and...
MyFS: In the beginning…

MyFS: In the beginning…

About ten months ago, a small group of people working in the financial services sector sat down and had a chat. We talked of the value of ‘crowd wisdom’ and how in the modern world, with the growth of social media and personal technology, the opportunity to bring people together to shape and mould the environment in which we all live was greater than ever before. It used to be said that ‘necessity is the mother of invention’, yet while that may still have its place, we favoured the concept that in the modern day, true innovation and development in society comes from open conversation and shared thought. We moved on to talk about working in the financial services industry and how, through this collective wisdom we might be able to make a difference in the wider society. After all, financial services have an impact on everyone’s life, regardless of an individual’s personal wealth, age, sex or religion. We looked at examples, such as the massively influential TED, and wondered if something like this could ever be adapted to an industry that has seen such cynicism levelled at it over the years. And then we thought, well, hell, it’s at least worth a try… and so My Financial Services (MyFS) was born. MyFS was created to be an open and interactive forum, far removed from the closed-door meetings that are all too common in the financial industry. It will bring people together to share their thoughts on the future of the sector and create open dialogue that can be used to shape the industry in order to better serve...