Ian Neale, Director at Aries Insight, said: “Bridging pensions, have long provided a huge benefit to many, but have also created a number of broader, at times industry-wide, issues to be considered. New regulations have closed a loophole correcting PPF compensation calculations which previously meant many members on bridging pensions would have been better off had their scheme entered the PPF by locking in a benefit that was intended to be just a temporary support measure. However, many of the broader issues still remain and, worryingly, they are either unacknowledged or genuinely unknown by many in the industry.
“When calculating Pension Input Amounts for Annual Allowance purposes there are several outcomes and possibilities faced by both active and/or deferred members who have a bridging pension. For individuals who retired during the tax year, a bridging pension may impact on both their Annual and Lifetime Allowance position. Bridging pensions have also become increasingly complex when considered alongside the ever-changing state pension age. With many pension schemes historically merely citing ‘state pension age’ in their scheme rules, many trustees have been left to try and navigate complex amendments and legislation to correct this in order to reflect the contemporary changes.”
Neale added: “These latest changes will undeniably impact members and will have a significant and ongoing impact on their level of income in retirement. The issue is that most members will not be expecting these changes, so schemes need to be sufficiently prepared not only to handle the technical and practical implications, but to communicate these changes to members accurately and effectively as well. It is crucial that schemes and advisers remain on top of even the smallest legislation so that they can truly understand how and when it could impact their members and, subsequently, how they can ensure members still have good outcomes.”
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