RT: What’s been the effect of COVID on retirement plans?
JL: I think that’s another one where it’s very different for different groups of savers. We are starting to see statistics and research papers coming through now showing the effects. There have been a lot of stories about people who have either been forced to retire early, and have had to make changes around that, or have had to delay retirement after losing a job, which has caused a shortfall in their savings.
I believe it’s also an area that’s had a big effect on people’s attitudes and priorities. Even for people who have been fortunate enough not to have experienced the very immediate effects of losing a job – everyone has been made to really think about what they want to do. We are seeing stories about lots of people who have realised they would like to retire sooner, having perhaps reassessed their priorities and how they want to spend their time. These people have had to think about when they can realistically afford to retire and how much they will need in retirement. For example, some might be thinking that they would rather retire sooner and make do with a bit less, rather than continuing to work in order to try and save as much as possible.
On the flip side, we have also seen a couple of stories saying that a minority have realised that they really like working. Some people, who have been furloughed and lost jobs, have realised that they don’t want to retire yet, and so might be thinking more about the phased retirement options. They may not have thought about how the pension freedoms affect them before and are now realising that they’ve got that flexibility, for example by having a hybrid: working a bit less and using some of their pension. So I think it’s an area where flexibility from the pension freedoms is really helping people no matter how they’re trying to adapt, or how their plans have been changed due to the pandemic.
RT: How have queries from advisers changed since the pandemic?
JL: For the technical areas I see, I would say it actually hasn’t changed very much at all. Although the pandemic is a very extreme example, advisers always plan for unexpected events – such as clients unexpectedly losing a job or falling ill and not being able to work. So I think in terms of day-to-day technical concerns and pension rules to work around, it’s stayed broadly the same.
Trends and changes in adviser queries are more affected by the time of the year; for example, there are always some clients that have an unexpected contribution or annual allowance problem near the end of the tax year. Adviser queries also change most when there are amendments to the rules or the regulations, as advisers have to rethink plans they have made for their clients based on the previous rules. Those sorts of things impact the trends and queries we see more than unexpected events.
RT: And finally, what are the most common questions you face from advisers?
JL: Death benefits and succession planning have been top of the list since the pension freedoms – once the initial rush died down around the different drawdown and lump sum options for retirees. It’s an area with an enormous amount of flexibility built into the rules, but again, comes with a lot of pitfalls to avoid. For example, there are different options between different providers to work around, and tricky points in the rules, such as those involving when beneficiaries can have drawdown. It’s an area where, unless one person wants to leave all their pension to one other person and there’s no one else to consider, each case is a little bit different. Advisers want to make sure that there’s not a little quirk or consideration that they need to take into account for each different scenario, so it’s definitely an area where we see a lot of queries just because it’s such a big area of planning and has so many different things you can do with it.
The lifetime allowance is another key area, as it affects a lot more people now. Some of the questions are about the calculations, which aren’t simple, particularly if people are taking money from different pensions at different times. However, questions around possible ways to minimise the lifetime allowance charge are the most common. I think we’re moving towards people thinking of the lifetime allowance as an allowance rather than a limit. There are more and more people now realising that their pensions are going to go over the lifetime allowance and although it’s not a sign of something going wrong as such, it is still something to plan around. Also, from an adviser’s point of view, the first question that is always going to be asked is: “Is there any way of minimising that effect and the liability for the client?” So, I think that’s one of the areas which has seen the most change, in terms of queries, over time.
