What happened to pensions in 2021?

It was another year of evolution rather than revolution in pensions. Between January and July we were apparently dusting each other off after the pandemic, from August to November we were “going back to normal” and we spent December rewinding everything.

Legislative changes were minimal, despite the increase in the government’s tax bill, and regulatory changes were also rather slim on the ground as the Financial Conduct Authority played Covid catch-up with everyone.

The regulator got off to a good start in January with the release of its defined benefit advice assessment tool, which allows advisers to assess their advice in this area using FCA metrics.

It is a very useful guide; the only problem is that the number of companies able to offer this advice is dwindling day by day as professional liability insurance restrictions continue to weigh on us.

In February, the Professional Finance Society launched its Vulnerability Task Force, showing that the industry can be proactive about consumer issues.

Vulnerability is a key theme for the regulator, and the problem has unfortunately worsened due to Covid-19 and the need for some people to access their pensions earlier than expected.

It is therefore encouraging to see an initiative that goes beyond regulatory compliance and focuses on the needs of our customers.

The only legislative change of note came in the March budget, in the form of the lifetime allowance freeze.

Given the government’s need for liquidity, this was probably less affected than expected, but it will of course result in a penalty for more and more people for having good saving habits and / or strong investment growth.

Advice in this area is far from straightforward and the help of a specialist will be of great value to those concerned.

In July, the regulator reiterated its concerns about ongoing advice, noting in its annual report on the retail intermediary market that 61% of advisers’ income comes from ongoing fees rather than transaction fees.

Those of us who were around before the retail distribution review may recall that this was seen as a desirable outcome, but now it’s seen as a sign that customers may be paying for services. that they don’t need.

Fortunately, many clients who have experienced a direct demonstration of their loss capacity in 2020 have a new appreciation for the value offered by advisors, managing long-term expectations and avoiding instinctive decision-making. , especially with regard to income payments. .

July also saw confirmation of proposed changes to the minimum retirement age, as well as the usual convoluted proposals for transitional protection.

Much time was spent investigating the rules of the plan and reviewing transfers until the government ended it by closing the “window” in November.

There was a return to live conferences starting in September, and the opportunity to network and learn from other advisors was well received by many. It is clear that the profession did not stand still during the confinement.

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