What are the implications of the pension provisions being introduced in FA2017?

0

The second Finance Bill 2017 passed its second reading on 12 September and as I write this the committee stages are expected to conclude no later than Thursday 26 October.The Bill was published on 8 September (named Finance Bill 2017-19, being the first Finance Bill of the 2017-19 parliamentary session). It reintroduces most of the provisions dropped from the first Finance Bill 2017.

Retrospectivity
As I write this, the government has confirmed that all policies dropped from the Finance Act 2017 will be given retrospective effect from the original intended date. This isn’t something that happens too often  –  with many of us scratching our heads and asking why? It’s not the first time, but with the time it is taking to pass through parliament (with no apparent disadvantage to either HMRC or pensioner members), it has been a very confusing and uncertain year. That is not good for pension administrators, advisers or members.

Employers must be careful not to ‘pick and choose’ who receives the benefit.

MPAA reduction
The government has made it clear it believes that retaining a £10,000 MPAA is inappropriate and no evidence had been submitted to persuade it otherwise. The retrospective MPAA £4,000 limit (from 6/4/2017) for individual members should be taken into account when advising on requests to access benefits flexibly or indeed, where benefits have already been accessed, particularly where a UK relevant individuals are potentially still saving for retirement or using a pension scheme for accumulating tax-efficient funds.

The £500 pension advice exemption
The increase in the pension advice exemption from £150 to £500 results from the findings of the Financial Advice Market Review: which identified that those approaching retirement were making increasingly significant decisions on pensions and would benefit from taking proper advice.This is a significant change and will be very helpful for employers, trustees, pension members and financial advisers.The provision of pension advice will be a valuable benefit for the employee considering their plans for the future. It could be very useful to help members access professional financial advice, when previously they may have considered it inaccessible.

I’m sure that this is an exemption that will be taken up in whole or in part to enable employees to best consider their retirement plans. Employers must be careful not to ˜pick and choose” who receives the benefit. As mentioned above, in order to fall within the exemption, the benefit must be open to all current employees.

One of the ways in which an employer could choose to restrict the benefit is by confining it to those within five years of pension age (which will generally mean employees aged 50 and above).

It’s an interesting development and it’s one which needs a good look at – particularly when there are large auto-enrolment schemes with members who need to review their future plans, putting Financial advisers time at even more of a premium than it is currently.

Next time we’ll have a look at a retirement planning tool which could help employers, trustees and financial advisers with that planning.

 

 

Share.

About Author

Dubbed by friends and colleagues “The Pensions Professor”, John Reynolds is widely acknowledged as one of the country’s leading experts in the financial services education sector. He has spent 20 years teaching, consulting, mentoring and writing on the subjects of pensions and investments. John’s unique ability to take his years of experience and technical knowledge and present it in an easy to understand format, has resulted in his talents being very much in demand. His portfolio of corporate clients include CII, Lloyds, Scottish Widows, Santander and Wesleyan; as well as numerous IFA clients whom he provides technical consultancy, mentoring and training on client case studies and staff training.. He has put his extensive expertise (and heart and soul!) into developing the expertpensions (EPL) proposition. EPL is a structured and interactive technical exam training programme for IFAs. It's designed to give financial advisors the required technical knowledge, study strategy and exam technique to confidently sit and pass the AF1, AF3, AF4 and AF5 exams. Its online, it's fully supported, structured and designed to help advisers reach Chartered Financial Planner status quicker. It's ready to help your advisers reach chartered status

Leave A Reply