Untangling the pensions “Webb”

As we enter a period of pension uncertainty impacted by Brexit negotiations, a coalition government and changes to the Finance Act, what could all of this mean for our pension pots?

PM+M Wealth Management hosted a breakfast session on 25th July with former Pensions Minister Steve Webb.  Steve was Minister of State for Pensions between 2010 and 2015, the longest-serving holder of the post before moving to Royal London as Director of Policy and External Communications.

Steve provided his own unique insight into the possible future structure of pensions, the impact we will face and what we should be doing now to protect our future.  Steve discussed how the Government may look to reduce the annual pension tax relief bill of £40 billion, by further reducing the annual amount you can pay into a pension, or further encouraging saving into ISA’s rather than pensions, and interesting option as we all agreed.

On the upside the 25% tax free cash element of a pension is likely to remain over the long term, to quote Steve, Governments will “pluck the goose with the minimum amount of hissing!”

With a number of bankers in the room the conversation soon turned to the transfer out of Defined Benefits Scheme to Defined Contribution schemes to take advantage of new pension freedoms.   Over the last twelve months 80,000 people have left Defined Benefit schemes, with attractive transfers values being driven by the low interest environment.   We discussed five good reasons to transfer, flexibility, higher tax free cash, inheritance tax, health and concerns over the employer, verses five good reasons to stay, certainty, inflation, investment risk, provision for survivors and taxation.

Other subjects included the ever increasing State Pension age, the new Pensions Dashboard , auto enrolment, and the possible introduction of a form of auto enrolment for the self employed.

To round off we discussed the importance of seeking financial advice.  A recent report by Royal London calculated advised clients are better off by a total of £41,099 in financial assets and pension wealth, compared to those who did not take advice.

The ticketed event raised over £300 for the Pendleside Hospice Challenge, a big thank you to everyone who attended, and helped raise money for such a fantastic cause.

If you are considering transferring out of a Defined Benefits scheme, also known as a final salary scheme or you wish to discuss any aspect of financial planning please contact Antony.keen@pmm.co.uk