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Filling the ‘guidance gap’ will be crucial. Encouraging employers to engage with high quality commercial guidance solutions is the way to improve financial education during the working life and thereby outcomes in retirement.
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A priority should also be to look at simplifying the Lifetime Allowance/Annual Allowance limits – only one is needed, ideally the Annual Allowance, which naturally limits the amount out.
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There is a need to build confidence and consistency in the pension freedoms to ensure people make the most of these changes. Ros Altmann, in her position as Pensions Minister, will be able to clarify some of the anomalies in the freedoms legislation. For example, employers appear to be mandated to pay for advice on transfers only if the transfer is completed, and taking UFPLS could mean that earmarked pensions are lost to ex-spouses.
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The industry is also keen to address the issue of GMP reconciliations. Resource dedicated to this with HMRC would be highly welcomed as well as clarity on GMP equalisation, between men and women.
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There is an opportunity for Ros Altmann to promote the idea of early access (pre 55) to pension savings as something that will encourage saving for the long term. For instance, early access in where an individual can access their own savings and contributions to help purchase a house, fund their children’s school fees or a major event in their life.
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The current system for the state pension looks unsustainable without a significant increase in tax, albeit over a relatively long period. The state pension, courtesy of the triple lock that all major parties have pledged to maintain, is set to cost £100bn this year alone, incidentally the same figure as the UK’s deficit.
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