STATE OF THE NATION OVER TWO LINES PENSIONS IN 2016 & 2017 Presentation subtitle/presenter 23 October 2017
STATE OF THE NATION PENSIONS IN 2016 & 2017 Learning objectives • Reflect on the key changes to pensions in 2016 and the ongoing effect for clients • Consider the changes likely to occur in 2017, and • Identify opportunities to assist new and existing clients
2016 LOOKING BACK 1. Pension Freedoms
STATE OF THE NATION FREEDOM & CHOICE Story so far: £4.9bn 332,000 cash withdrawals £8.9bn OUT £4bn 1.08m drawdown withdrawals £6.5bn 121,000 annuities £16bn IN £9.5bn 131,800 drawdown plans Source: ABI pension freedom statistics – The new retirement market: The evolution continues 11 th April 2017
FREEDOM & CHOICE PLANS FOR LUMP SUM Source: FCA Retirement Outcomes Review Interim Report July 2017
FREEDOM & CHOICE INCOME DRAWDOWN Percentage withdrawn: ABI RLI 6% 4% 2% 0% Q2 2015 Q3 2015 Q4 2015 Q1 2016 Source: ABI One year of freedom data 15 August 2016
DRAWDOWN GOVERNANCE HOW MUCH ARE PEOPLE TAKING Source: Royal London – ‘How much income are people taking?’, June 2016
STATE OF THE NATION INCOME SUSTAINABILITY SUSTAINABILITY SCORE Q4 2016 SUSTAINABILITY SCORE Q1 2016 60% PROPORTION OF PLANS 50% 40% 30% 20% 10% 0 0 – 25% 25 - 50% 50 – 75% 75 – 100% CHANCE OF ACHIEVING A LIFETIME SUSTAINABLE INCOME
STATE OF THE NATION RETIREMENT OUTCOMES REVIEW – JULY 2017 5 main issues identified • Consumers fully withdrawing pension pots to invest elsewhere – Lack of trust in Pensions • Early access – Path of least resistance • Non-advised drawdown customers may struggle with the complexity of the decisions they have to make • Providers continue to withdraw from the open annuity market • Limited innovation for mass market consumers Source: FCA Retirement outcomes review interim report July 2017
STATE OF THE NATION RETIREMENT OUTCOMES REVIEW 4 Remedies identified • Extra protection for consumers who buy drawdown without advice • Giving consumers early access to their savings without having to buy a new drawdown product • Making it easier to shop around for drawdown • Helping consumers understand their options Source: FCA Retirement outcomes review interim report July 2017
FREEDOM & CHOICE OPPORTUNITIES FOR ADVICE At retirement advice: Consumers facing difficult choices: • Guarantees versus flexibility • Timing of withdrawals • Income sustainability DB to DC transfers: Demand for advice increasing: • DB schemes looking to reduce liabilities • Transfer values at a current high
2017 LOOKING FORWARD 2. AE review
Earnings at staging date/date they become eligible AUTOMATIC ENROLMENT REVIEW ELIGIBILITY Upper contribution threshold £45,000 1 Eligible Jobholders Non-eligible Non-eligible Jobholders Jobholders Qualifying threshold £10,000 1 Non-eligible Jobholders Lower contribution threshold £5,876 1 Entitled Workers Age 16 Age 22 SPA Age 75 Age at staging date/date they become eligible 1 2017/18 terms Source: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/576423/review-of-ae-earnings-trigger-2017-2018.pdf
Earnings at staging date/date they become eligible AUTOMATIC ENROLMENT REVIEW ELIGIBILITY Upper contribution threshold £45,000 1 Eligible Jobholders Non-eligible Non-eligible Jobholders Jobholders Contributions from £1 Qualifying threshold £10,000 1 Non-eligible Jobholders Lower contribution threshold £5,876 1 Entitled Workers Age 16 Age 22 SPA Age 75 Age at staging date/date they become eligible 1 - 2017/18 terms Source: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/576423/review-of-ae-earnings-trigger-2017-2018.pdf
AUTOMATIC ENROLMENT OPPORTUNITIES FOR ADVICE Re-enrolment: Employers have a six month window to carry out re- enrolment: • No postponement • Single AE date for all workers • Eligible opt-outs & scheme leavers Secondary market: Chance to review scheme • Scheme design • Compatibility with payroll dates • Service & support
STATE OF THE NATION PENSIONS IN 2016 & 2017 Learning outcomes • Reflect on the key changes to pensions in 2016 and the ongoing effect for clients • Consider the changes likely to occur in 2017, and • Identify opportunities to assist new and existing clients
THANK YOU The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions and is a member of the Association of British Insurers. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration number 30 2391. Registered in England and Wales number 4414137. Registered office: 55 Gracechurch Street, London EC3V 0RL.Royal London Corporate Pension Services Limited is authorised and regulated by the Financial Conduct Authority and provides pension services. The firm is on the Financial Services Register, registration number 460304. Registered in England and Wales number 5817049. Registered office: 55 Gracechurch Street, London EC3V 0RL. September 2017 PR x PN 0001
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