As April 2015 fast approaches, the pension changes are just around the corner but ‘don’t panic’, there is an answer. On April 6th pension managers, schemes, insurance companies and pension scheme trustees may be anticipating a huge number of enquiries about how to access current and deferred funds and the consequences of that.
Will the Guidance Guarantee really be enough to help employees? Will it help to avoid taxation issues and the limitations of the new annual allowance or aid understanding of their existing Defined Benefit or Defined Contribution scheme rules to make good decisions about what to do next? And of course will it be in time to stop them calling pension departments to ask what the answers actually are? To date we hear of very few employers that are likely to allow access to the new pension flexibility within their own schemes. Jonathan Watts-Lay, Director at WEALTH at work: “The interesting dynamic with the changes appears to be that employers are concerned as to how they will deal with requests from employees and deferred members to take advantage of the new rules. Our service has always allowed employees to take income from their pension in the way they wish, so the new rules just mean flexibility is available to all whatever the pot size.”
He adds, “It is clear that there are three fundamental questions for the employee as a result of the new flexibility; firstly what are the options available and the advantages and disadvantages of each? Secondly, how to work out the right option? And thirdly, how to implement a chosen plan of action? These can be answered in turn by financial education, supported by advice and guidance and then ensuring the service provider that the employer uses can implement all options whether that is simple cash drawdown, full drawdown, an annuity or indeed a combination.”
