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DB transfers and state pension age rises: 2017 in pension news

It's been an important year for pensions, with big stories happening in connection to defined benefit pension transfers and the state pension age.

What made the news?

This year was not billed to be a huge year for pension news but we have had some big stories nonetheless.

We take a look back at some of the biggest pension stories to hit the headlines in 2017.

 

What made the news?

This year was not billed to be a huge year for pension news but we have had some big stories nonetheless.

We take a look back at some of the biggest pension stories to hit the headlines in 2017.

 

DB transfer bonanza

Defined benefit transfers exploded in 2017 and as thousands of transfers poured in, this was the one story which kept rumbling on.

Things kicked off on 24 January when the Financial Conduct Authority (FCA) issued a warning shot to advisers over advice practice which it was concerned about.

These concerns prompted action from the FCA. The first firm to agree to a permission restriction was overseas advice specialist deVere which was required to stop providing transfer value analysis reports in February, as New Model Adviser® revealed.

A total of five firms, including high profile name Intelligent Pensions, have stopped DB transfers following FCA intervention. A total of 92 firms were included in the FCA’s review.

British Steel

As demand for transfers skyrocketed, the regulator continued to find some examples of poor practice. 

Nowhere were these concerns raised more prominently than with the British Steel Pension Scheme, where 40,000 members were faced with a choice of move into the new British Steel scheme, the Pension Protection Fund or take a transfer by 11 December (a deadline later pushed back).

The local Welsh IFAs simply could not cope and most of them closed their doors to new transfer business around October time because they were getting too many transfer requests.

This prompted an opportunity for ‘travelling’ advisers to come into the Welsh towns and sell their services.

 

New Model Adviser® first revealed one advice firm, Active Wealth (UK), agreed with the FCA to stop accepting new business in November. 

This week the story ended up on the BBC news at 6pm.

 

SPA delays

The government was originally due to publish its response to the John Cridland review of the state pension age (SPA) by 7 May.

However with Theresa May’s snap election, this was quietly kicked into the long-grass and the announcement came in in July. The Department for Work and Pensions went ahead with Cridland’s recommendation to increase the SPA to 68 seven years earlier than planned. It will now rise from 67 to 68 between 2044 and 2046.

The issue was hugely political and a freedom of information request by New Model Adviser® revealed the Treasury met the DWP to discuss the SPA on the day of the election (8 June).

In total there were 13 meetings between DWP and the Treasury and five with No.10 officials to discuss the SPA. Clearly this was not something left to the DWP to decide on its one.

 

Prudential’s bumpy take off

Last September Prudential announced the launch of its new drawdown product, the Retirement Account.

However this launch did not go as smoothly as intend with New Model Adviser® revealing in June Prudential was reviewing 17,000 of these new drawdown accounts owing to administrative issues.

The provider also said it would provide redress to customers affected.

 

 

Reflecting on our pension freedoms

Now two years since pension freedoms has been in place, 2017 was a year when the government and regulators began to dig into how they are actually going. The analysis so far points to some worrying issues.

In July the FCA released its Retirement Outcomes Review which pointed to a lack of shopping around at retirement, a lack of trust in pensions and annuity providers leaving the market. The only saving grace was that 94% of savers who withdrew their current pots had other sources of income such as DB pensions.

Then in September, MPs on the Work and Pensions Select Committee announced an inquiry, which is still ongoing, into pension freedoms. This has received some interesting evidence from the public including from many who say the requirement to pay an adviser for DB transfers is a scandal and IFAs’ fees are ‘highway robbery’.

We await the final report from MPs into pension freedoms.

 

 

Pensions cold call ban delay

One of the good pensions news stories of 2016 was the cold calling ban, which chancellor Philip Hammond announced in last year's Autumn Statement following a petition by IFA Darren Cooke.

However the consultation for the ban was delayed due to the general election and was once again pushed back when the government did not include the ban in the Financial Claims and Guidance Bill.

New Model Adviser® reported in October this may mean the cold calling ban will not come into effect until 2019. With the FCA estimating 100,000 people were 'potentially the subject of a scam' in the last year, a little urgency may have been a good idea.

 

Sipp claims turning point

Claims against Sipp providers is not a new story but one that took an interesting development in 2017.

In May New Model Adviser® reported Sipp firm Carey Pensions had posted a loss of £153,800 in 2016 due to complaints about investments it accepted.

It was later reported the Sipp firm was facing 77 claims at the Financial Ombudsman Service (FOS), many of which were being settled.

With the FOS considering so many cases this may mark a turning point in investors claiming against their Sipp provider over investments. Previously these claims tended to be turned away by the FOS.

 

A paler shade of green

In February the government released its green paper on the current defined benefit system in a bid to curtail deficits from becoming out of control and stop another BHS scandal.

The paper included a number of proposals to improve the DB system such as a voluntary superfund and moving to a lower-level of indexation for pension benefits.

However many were quick to criticise the paper with former pensions minister Steve Webb claiming it was the ‘one of the greenest green papers in living memory’.

The DWP expects to release a white paper on DB schemes by February 2018, meaning it is likely to be years before any of the policies in the paper come into law.

 

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