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... read more

Pensions and Pontius Pilate

To mark the launch of the MyFS report on funding retirement, we asked some of our panelists from the debate to give us an update on their thoughts regarding the new pension freedoms that come into effect next week… First up is Neil Lovatt, director at Scottish Friendly.   This is going to be a remarkable year. In April we’re going to see the most radical reform in pensions market in its history. Then I suspect we’re going to see an explosion of activity as people take advantage of the changes. In the space of a few weeks we’ll see the beginnings of changes, the effects of which will take a generation to fully understand and comprehend. Immediately after the April reforms we’ll have a General Election and a new government will have to make an early and important call: do they stick with the reforms or do they button down the edges? As you may have seen at the MyFS roundtable in December, I’ve got form on this topic. I can see great opportunities but immense dangers. For me the biggest concern is that customers’ pension assets will be used and abused outside the confines of the protection afforded by the regulated financial services sector, in particular the buy-to-let sector. I recall only too well in 2004 the then Labour government’s proposal to enable SIPPs to purchase residential property. It caused an unseemly tidal wave of marketing by the buy-to-let sector telling potential clients that they could now get tax relief on their properties. Fortunately just as the great transfer of assets in pensions to property was about... read more

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... read more

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... read more

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... read more

Panellists announced for ‘Funding Retirement’ debate

On Wednesday 17 December, 2014, the inaugural My Financial Services (MyFS) event will take place on the subject ‘Funding Retirement’. MyFS are delighted to announce that the following people have confirmed that they will be part of the panel debate:     The Right Honourable Steve Webb, MP Steve Webb is the Liberal Democrat MP for Thornbury and Yate and has been the Minister of State for Pensions since May 2010. Prior to this, Steve was the Member of Parliament for Northavon from 1997 to 2010 and held a number of posts in the Liberal Democrat Shadow Cabinet including Shadow Secretary of State for Energy and Climate Change and Shadow Secretary of State for Work and Pensions. Outside of politics, Steve studied philosophy, politics and economics at Hertford College, Oxford. He then worked as an economist at the Institute for Fiscal Studies from 1986 to 1995 before being appointed Professor of Social Policy at Bath University.   Stephanie Condra, Pensions Specialist, AXA Investment Managers Stephanie works in the Clients and Markets group at AXA Investment Managers (AXA IM) delivering thought leadership and market insight across regional markets and focusing on the retirement market. Prior to joining AXA IM, Stephanie led the corporate investment consulting business at a pension consultant in Ireland and prior to that structured investment and wealth management solutions for clients of a private bank in Canada. Stephanie has over 15 years’ experience in the investment industry. She completed the specialised Global Asset and Wealth Management MBA programme at Simon Fraser University in Vancouver and also holds the Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA)... read more

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... read more
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