The Pension System Dips Back into Pre-A-Day Complexity



Posted on: 18th January 2016

A-Day will have happened ten years ago as of 2016, but in many ways things are largely indifferent now to the way they were back then.

Over the coming twelve months, UK’s public looks once again to be hit with a wide variety of twists, turns and modifications – particularly in relation to pension reforms. 2015 brought about some of the most important and widespread pension freedom reforms in history, with the April 2016 Budget already having been lined up for more of the same.

In particular, one headline that’s grabbing the attention of many for all the wrong reasons is the lifetime allowance reduction to £1 million from the current £1.25 million. Indeed, it’s changes like these that have made it hit home as to just how still and stable things were in the world of pensions over the past ten years, prior to 2015.

A-Day was supposed to simplify the UK pensions system for the benefit of all involved. Eight pension regimes were scaled down to just two, making the subject at least somewhat easier to digest for the masses. As of April next year, there will be another two new protection regimes introduced when the LTA changes come into effect. As such, when you add the current six LTA regimes to these plus the pension commencement lump sum protection options, we’re actually left with more regimes than we had prior to the A-Day simplification.

So in many ways, it’s all gone full circle and we’re back where we started.

And of course, the fact that Individual Protection 2014 eligible applicants will still be able to apply right up to April 2017 makes the already complicated subject all the more convoluted.

Essential Advice, Now More than Ever

Whichever way you look at it, the big picture right now when it comes to retirement savings and pensions options in general is as complex and intricate as it had ever been. You might even say that the new-generation of UK pensions has peaked in complexity, which is entirely why independent advice has never been more important.

This is a problem that has been acknowledged by the government time and time again. They know, just like we know, that a striking majority of pension holders and retirement savers in general are not in fact making the very best possible decisions for their financial futures. And the obvious reason for this is the way in which they neither know about or understand the options available to them – precisely why the promise of more big changes to come only makes the whole thing worse.

As it’s looking right now, the general consensus seems to point to the biggest changes in 2016 mostly affecting the biggest earners and savers. Nevertheless, the time to think ahead and ensure all the right moves are made before spring is now – and time is running out.

With the right independent financial advice, the hidden opportunities in this undeniably complex pensions tapestry can be brought to light and capitalised on.