Interesting feature...............

Question: Interesting article..... I have checked all the Q’s & A’s so far…..but no real answers to the lead questions you posted…..can you provide your answers to them? • effects of the age change on retirement planning • actions clients can take prior to 6 April to avoid being caught out by the change • ways providers can help advisers and their clients.

Answers:

Fiona Tait: - Scottish Life

Age change
From 6 April next year the minimum age at which individual can access their pension benefits will rise to 55 with immediate effect*.
Clients who have already crystallised all of their pension fund will still be able to take a pension income, in line with HMRC limits, whether or not they are taking income at the present time.
Clients who have not yet crystallised their benefits will have to wait until they are 55* before they can access pension benefits.
Clients who have partially crystallised their fund will be able to take income from the crystallised portion of the fund but will not be able to access more PCLS until they 55*. This includes clients who have set up phased retirement plans which rely on an annual crystallisation of assets to provide tax-efficient income.

Action points
It is important to realise that if the scheme administrator does not have all the information they need to pay out benefits before 5 April 2010 they will not be able to complete any crystallisations for those under age 55*, and that gathering this information can take time.
The first stage is to identify and gather information on all the client's current pension arrangements. Due to changing work patterns most clients hold more than one pension when they reach retirement and it could be beneficial to consolidate them all into one plan before taking benefits (this is because consolidation is not possible once a plan has been crystallised).
The second stage is to ensure the pension plan(s) is/are suitable to provide benefits in the form that the client wants. All pension plans are able to provide an annuity but older plans are less likely to be able to provide PCLS only or an unsecured pension.
If either of these actions mean that the client is advised to transfer some or all of their plans to another arrangement the process should be started now. While it only take Scottish Life 5 days to pay PCLS into a client's bank account once we have received the transferred funds and all the information we require to process it, the average time it takes for this information to be sent to us is 40 days. This is after the application has already been signed (so you can add on the average time it takes you to get the client signed up). A significant number of plans take longer.

Client assistance
If they haven't already done so, providers should write to all clients who were born between 6.4.1955 and 5.4.1960 and advise then that unless they take action prior to April 2010 they will not be able to access their pension plan until they reach age 55*.
Advisers should not rely on their clients reading and understanding this information but should identify and contact all individuals within their client bank who fit into this group and offer to carry out a review. These clients can be further divided into 3 groups:
1. Those who you know were thinking of taking benefits, including existing phased retirement clients. These are a priority as they will definitely be affected by the change.
2. Those who do not intend to retire but may not be aware that they can access their pension fund before they stop working. Some of these clients might benefit from taking PCLS before April, for example to pay off unsecured debt.
3. Those who probably won't take benefits immediately but may do so within the next 5 years or so. These clients should be switching to a short term strategy aimed at providing a targeted level of income at the time the client is likely to need it.
An additional group of clients to contact are those who were born between 6.4.65 and 5.4.1955. Although they are too young to take benefits before next April, some of these may have been planning to take benefits at age 50 and will need to alter their plans accordingly.

*with the exception of clients who have protected retirement ages due to their occupation prior to A-Day.

Vince Smith-Hughe - The Prudential 

1. Effects of the age change on retirement planning.
From 6 April next year, the minimum age at which pension benefits can be taken from a personal pension will rise from 50 to 55 - leaving advisers with important advice issues to cover with clients born between April 1955 and April 1960.

2. Actions clients can take prior to 6 April to avoid being caught out by the change
There will be a clear need to review and possibly re-shape some clients' entire retirement strategies. Key areas will be making best use of all available pension planning opportunities such as paying contributions, considering recycling of income and whether taking some or all of their tax-free cash while they still can is appropriate. Clearly this is an area requiring individual advice as this won't be appropriate for everyone.

3. Ways providers can help advisers and their clients.
Advisers should undertake a contact exercise with the clients in the age group above to ensure that all clients are notified of the changes, giving them sufficient time to act before the change next April. Standard template letters are available from several insurers including Prudential.

Stewart Dick - Hornbuckle Mitchell

I've addressed the three points in turn:

Effects of the age change on retirement planning.

The approaching age change will impact on two areas. The main area will be those immediately affected - i.e. those in the 49 - 54 age bracket. For many the change will make no difference to them whatsoever as they don't intend accessing their pension funds before age 55 anyway. However, for others the change will require some immediate thought and action, and the role of the adviser here will be key. Advisers will first of all need to identify which clients fall into the affected age bracket, and then discuss the change with those clients to see whether or not action is required.

The second area is the wider, younger client bank. Are they aware that they will not be able to access their retirement funds until age 55? While the current high priority are those directly affected, the changes will impact on younger pension savers as well. Advisers will need to ensure that their clients are fully educated and aware of the rules.


Actions clients can take prior to 6 April to avoid being caught out by the change.

Clients should be speaking to their financial advisers as quickly as possible - while April may still seem a long way off, it will inevitably come around far quicker than expected for many. It's important to consider their existing pension provision in conjunction with their other savings and assets. For example will they need access to all or some of their Pension Commencement Lump Sum prior to their 55th birthday? Are funds required for a specific purpose such as education costs or to repay a pension mortgage? Are funds available elsewhere (bearing in mind the fact that once any part of the pension pot is crystallised it is subject to tax on death)?

Those clients who have already accessed part of their pension savings also need to be aware of the upcoming change - particularly those in partial drawdown. Are they aware that the fact they have vested part of their fund will not allow them to access the remainder of the fund before their 55th birthday after April?


Ways providers can help advisers and their clients.

Providers should of course be willing to help advisers and their clients wherever possible. In the case of this rule change they can perhaps be of most use raising awareness and providing advisers with information. It would be really interesting to hear how advisers feel that we could help them though - we are always striving to improve our service so if there is anything that you feel a SIPP and Income Drawdown provider could or should be doing to help you and your clients then we'd love to hear about it!"

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