The firm, which acts as a trustee for a number of ongoing pension schemes across the UK, says the UK pensions landscape is facing higher degree of uncertainty than ever given post-election developments across the UK and within Scotland.
Dalriada Director Adrian Kennett said:
“The last Government significantly altered the UK pensions landscape. Whilst most within the industry would like to see a period of calm and consolidation to implement these changes, that is highly unlikely to happen given the backdrop of European legislation.
“The introduction of pension flexibility has yet to create a huge change in terms of consumer behaviour – we’ve seen a lot of inquiries about transfer values of pensions but very little has actually changed so far. The question over the next five years is whether over 55’s will start to exercise their new freedoms and begin, in large numbers, to access their pension funds.”
Sean Browes, a trustee representative at Dalriada, added “I believe the lack of enthusiasm to embrace ‘pension freedoms’ might be due, in part, to the lack of new, innovative products being made available. I would expect these would develop in the coming months as there is a clear market opening. More significantly, the lack of financial education and, consequently, general mistrust and misunderstanding of financial products, including pensions, is a bigger hurdle to overcome.”
Adrian Kennett, commenting on the newly appointment Pensions Minister, Ros Altmann, said “Given her reputation as a campaigner for greater support for the elderly, she has a tough balancing act between supporting early access to pension funds through the new flexibility rules and the need for longer term retirement provision.
“I suspect we will see more of Ros Altmann’s presence reflected in the first full Budget later this year when she’s had a chance to get a better handle on the balance between her ministry and the Treasury. In the short term, possibly for the 8 July Budget statement, I would expect the Government to look at ways of cutting back tax relief on pensions. These measures costs the Treasury tens of billions of pounds so tinkering with them could be a relatively easy way to raise significant funds. The early indications from pension flexibility are unlikely to meet expected tax revenues and this shortfall will need to be addressed.
“The Government’s commitment to an in-out EU referendum I expect will have a significant impact on pensions. I certainly foresee a flurry of activity towards the tail end of 2016 when the result of the referendum could be known and the implementation of IORP II is required - in the same way that you’ve seen a flurry in the last 12 months around DC flexibility. Putting the potential economic impact of a vote to withdraw from the EU aside, it could lead to greater pension flexibilities as the IORP II rules would not apply to the UK.
“IORP II brings wide-reaching potential changes – covering areas as wide-reaching as Trustees’ knowledge and understanding, disclosure and governance. Whilst the UK is ahead of the curve in terms of implementing these provisions, particularly with regards to DC provision (for example the introduction of the Chairman’s Statement in 2015), there is still much work to be done.
And as with all these things the devil will be in the detail – the way in which the European requirements are brought into UK law is vital.
“It is not a case of “it came from Brussels and therefore it must be bad”. The changes involve sensible governance. If we opt out of Europe, will we introduce them anyway?”
Chris Roberts, a trustee representative at Dalriada said:
“Regardless of political persuasion, the landscape in Scotland also creates future challenges for the pensions industry. If Scotland moves towards full fiscal autonomy it has the potential to create cross-border issues in terms of pension stability (depending on IORP), scheme design, freedom of UK wide scheme members and challenging questions over scheme administration. In this event, the pensions industry would seek to work closely with both the UK and Scottish Governments to develop clear structures to address these issues.”
|
