Anthony Carty: Pass or play with auto-enrolment and pension reforms

On Monday morning a pensions revolution will begin, with five million people up and down the country given the freedom to do what they like with their pensions.
[image type=”thumbnail” float=”left” src=”/wp-content/uploads/sites/2/2015/04/anthony.jpg” alt=”Anthony Carty, financial planning director at Clifton Asset Management” info=”none” info_place=”top” info_trigger=”hover”]
The sweeping reforms have also created opportunities and challenges in the auto-enrolment marketplace for Clifton Wealth.
The big question facing advisers was whether to pass or play when it came to offering an auto-enrolment service.
Passing didn’t mean ignoring auto-enrolment altogether but working with a third to party to ensure clients are given the service they deserve.
By playing, I was talking about being involved from the cradle to the grave. Clifton Wealth had no doubts, we were ready to play.
We already provided Sipps and SSASs to 1,300 corporate clients, all had a staging date and many were well on their way to be fully engaged with employee benefits.
However, some thought auto-enrolment was a new motoring club.
Clifton Wealth’s decision to play required extra resources but where was this to come from?
While that discussion was taking place, boom! The Chancellor George Osborne delivered his pensions bombshell that it would be possible to draw an entire pension pot and pay only the marginal rate of tax.
Totally unexpected but welcome all the same.
As a predominantly pensions-focused business, this presented Clifton Wealth with a perfect planning opportunity for those clients who wanted to take advantage of the new flexibilities. It also required extra resources.
Between the Budget freedoms and auto-enrolment, something had to give. We decided to segment the auto-enrolment opportunities and play with some but pass the rest.
Clifton has formed a strategic partnership with Lansdown Place Auto Enrolment Solutions to deal with clients who wish to comply but at the lowest possible cost. Any individual employee financial planning opportunities are passed back to us.
Clients who require a more holistic approach to their employee benefits, including auto-enrolment, are dealt with in-house.
The phone never stopped ringing and this is expected to continue and, more than likely, the volume of calls will increase.
We are ready and waiting to help our clients but at a price recognising that we have diverted resources. 2015 has already been an interesting year and the intrigue is set to continue.
Anthony Carty is group financial planning director at Clifton Asset Management

Pensions Freedom

Governments of differing stripes have, over the last 30 years, tried to simplify the path to an adequate retirement, and there is almost universally held agreement that in each case the changes implemented have simply served to complicate matters further.

Now we are faced (on April 6th 2015) with the Granddaddy of all changes. Happily titled ‘Pensions Freedom’ it offers us another glimpse into a simple and clear future as we prepare to bow out from the rat race.

Of course, in reality we are finding that these changes are neither simple nor clear. Faced with a public that will, for the first time in living memory, be given full access to their pension pots, we are gradually awakening to all manner of nightmarish possibilities – not least of which may be the overwhelming desire of some to get hold of whatever cash might be available and use it for whatever hare-brained reason they might currently be considering. This rather than using said funds as a replacement income in their retirement.

Yes, I know. We are adults and should be trusted to behave as such. It is our money and we should be free to spend it as we wish.

Of course. I can’t disagree.

However, in the constant search for civilising and responsible behaviours we do also acknowledge that our actions should sometimes be ‘restricted’ to protect both others and ourselves in our society.

Traffic lights might be a good case in point.

Using the ‘we are adults’ line of thinking we might agree that we should all be able to navigate a simple junction. However, we also know that there is always someone out there who will not be concentrating, or is in a hurry, or some other reason that will not stop them from slamming into the side of our vehicle. The traffic light doesn’t remove the risk entirely, but it most certainly reduces it dramatically.

I’ll come clean. This pensions freedom legislation is good policy. It will open up creative possibilities to many and the scrapping of the pensions death tax sees the end of a bad tax for the right reasons.

But where are the traffic lights?

Good quality advice has been promised to all and yet the government proposes that this advice will be dispensed by the Citizens Advice Bureau and the Pensions Advisory Service.

Anyone involved in the Pensions business (and we are heavily involved in this area) knows that our advice is given by highly qualified individuals with access to the most current thinking and sophisticated tools available. They understand what a minefield this topic is and spend a considerable amount of time and effort in making sure that our clients get extremely detailed and appropriate advice.

For this there is a cost.

I do not believe for one minute that the good people of either Citizens Advice or the Pensions Advisory Service will be able to provide even a tiny fraction of the required pensions advice needed and this is not only a shame, but gives us the real glimpse into the future of what the story of pensions freedom will actually be.