“We ended 2017 on a positive note, with the Department for Work and Pensions publishing its review of automatic enrolment. The decision to reduce the age of auto enrolment to 18 was a welcome one, along with the change to the definition of “band earnings” which will no longer exclude the first £5,876 of salary. These changes will benefit those on the lowest earnings, a disproportionate number of whom are women working in part-time jobs.
“We’d still like to see a clear signposting beyond the current auto enrolment contribution rates of 8% up to 12%, noting that the Government will carry out a further review of contributions in 2019 once the effect of the step ups in 2018 and 2019 are understood.
We also think there is merit in removing the earnings trigger of £10,000, potentially allowing those who earn below this amount to opt out of the employee contribution only.
“Pensions for the self-employed are still a challenge, but the Government has signposted the development of a framework based on engagement and convenience, using technology to make it easier for the self-employed to put some money away at appropriate points in their business cycle.
“The work being done by the FCA will, of course, continue throughout 2018 and we’ll discover whether the regulator will be given powers to regulate those who provide advice to institutions. Its platform review will be interesting and we’ll start to see some proposals in the summer. The FCA has three types of tools:
Increased disclosure to empower customers to shop around and to switch.
Fiduciary-type requirements, e.g. Independent Governance Committees to oversee platform providers, or a requirement placed on platform providers to act on their customers’ behalf in dealings with asset managers.
To encourage increased competition, either through the entrance of new platforms, or through alternatives to platforms coming from other areas of fin tech.
“I’ll be interested to see if there are any substantive areas of consumer detriment in the platform space, and if the FCA does spot some areas for improvement, I suspect that the second and third options will be favoured over the first.
“Guidance and engagement remain big challenges. The new Public Financial Guidance Body will be established in October and as well as helping individuals who write to them or phone them, it will have a responsibility to raise standards of financial literacy more generally.
“More work needs to be done to address the advice gap. What progress there has been from FAMR has acted to increase the quality of advice for the minority of the population prepared to pay for it. There has been next to no progress on helping those who are unable or unwilling to pay for advice to get help and support in making difficult and important decisions. The Work & Pensions Select Committee has this area in its sights and I expect that, during 2018, the Government will be challenged to look at this again and to think more radically about it.
“Finally, I expect the political interest in pensions to step up. The Labour Party is keen to explore further the concept of Defined Ambition, which can involve pooling or risks, spreading of returns and the introduction of guarantees. The Liberal Democrats see property assets as needing to play an increasing role in later life planning, and the Conservatives will continue to press for the empowerment of consumers and more efficient markets which help individuals take more responsibility and get better deals.”
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