Pension and Savings Policy Briefing Session

Transcription

1 Pension and Savings Policy Briefing Session Wednesday 26 th June 2013 What we ll be looking at Saving and Debt Today Towards a Savings Policy? Automatic enrolment update Pot Follows Member update IoD member research - results 3 1

2 Savings and Debt Today Savings Ratios Recovering But Nowhere Near Where They Should Be Debt Being Paid Down, Slowly From Very High Relative Levels ONS UNSECURED Debt Per Capita On Average 16k to 18k Per Household One Third Have No Savings 4 Towards a Savings Policy? Are Current Debt Levels Sustainable? What Happens When Rates Rise? Pay Day Loans; Pension Liberation We Need To Move, Over Time, From a Financial Culture Based on Debt to One Based on Saving We Need a Savings Policy 5 2

3 Automatic Enrolment Update Early Results Encouraging Capacity Concerns For 2014 Remain NEST Restrictions Likely To Go Simplified Compliance Regime? Smaller Employers Will Struggle About Compliance, Not Pensions Some Tales From The Shop Floor 6 Automatic Enrolment 2 Most Providers Selective A Handful Less So Who Will Handle Micro Employers? Does The Music Stop In 2018? Post 2018, New Business Will Be Micro Employers; Some Will Grow Into Large Schemes. Providers Will Need To Be Interested In This Market. 7 3

4 Pot Follows Member Now Confirmed As The Direction, And In The Pensions Bill Some Still Think It Won t Happen Good Scheme To Bad Scheme? Millions Of Very Small Pots Currently Slow/Costly Transfers Need Fast/Cheap Transfers Urgently 8 Pot Follows Member 2 Technical Advisory Group Policy Engagement Group Suppliers, Vendors And Individuals Are Working On Solutions In A Competitive Landscape UKFMPG Standards Issued Summer 2012 Do We Need A Database? 9 4

5 Malcolm Small Senior Adviser, Pensions Policy INSTITUTE OF DIRECTORS Retirement ti Isn t twhat titu Used dto Be IoD Member AttitudesTo Pensions And Automatic Enrolment What We ll Be Looking At: How IoD members are saving for retirement t today What they think about pension saving What they like/dislike about pensions What they think about automatic enrolment How they think AE will go 5

6 SOME NOTES ON SAMPLE/METHOD Over 1300 EMPLOYER members responded d from Policy Voice database Nearly 40% of total! 83% small employers <50 employees But some very large employers, too Member businesses often early stage growth/entrepreneurship But also FTSE 100/250 SAMPLE/METHOD 2 24 questions On-line response Real time human analysis Comments after every question and section 130 PAGES of verbatim comments A deep and rich qualitative data source Tracking work first done in

7 How IoD Members Are Saving For Retirement Today 82% saving into workplace/personal pension, up on 74% last time But numbers saving only in pension down More (50%) saving in ISAs for retirement SIPPs clearly popular CONTROL Wide range of alternatives mentioned Not just pensions......buy-to-let still strong How IoD Members Are Saving For Retirement Today 2 Pensions still seen as main source of retirement t income Many expecting to sell their business to fund retirement 18 different methods of saving/investing mentioned as being used to fund retirement Many will carry on working 7

8 What IoD Members Think About Pensions Negative to actively hostile Many scarred by Equitable Life I feel let down by the pension companies Pensions are a rip-off Annuities, and current rates, create hostility Complexity and constant rule changes Inflexible What IoD members like about pensions Tax relief...but even this is fading The tax relief on pension contributions is not now worthwhile given all the other restrictions on pensions As a Chartered Accountant, I now advise clients to avoid pensions Recent reforms welcomed, but not enough to change hearts and minds SIPPs 8

9 What IoD Members Don t Like About Pensions Where do we start? Complexity, inflexibility, lack of access Inability to transfer down the generations 55% tax charge particularly penal Annuities widely reviled, especially, but not solely, at current rates Buying an annuity is too inflexible The tax on transfers is outrageous What IoD Members Don t Like About Pensions 2 The UK pensions regulations are unnecessarily complex and prescriptive. Anything that reduces the complexity and gives savers increased freedom is an improvement only 4% think pensions fit Annual and Lifetime allowances I am now diverting my savings into other vehicles I have more control over The rules are constantly changed 9

10 Alternatives To Pensions ISAs and Buy-to-Let most cited And increasingly used Large appetite for radical reform of pensions and radical simplification With many ideas for new vehicles Some would end the system of tax relief Others are supporting compulsion, more than 2011 Automatic Enrolment Awareness/readiness both up on % Highly Aware, 62% Confident Sample Bias? Probably much lower in wider world Respondents now starting to engage And understanding complexity of process Some real anger emerging And first signs of wilful non-compliance 10

11 Automatic Enrolment 2 Verbatims showed growing awareness compared with 2011 of just what will be needed to comply Current auto-enrolment processes seen as horrendous Still some doubt of any employer role in pension provision But grudging recognition of the social policy issue We must do something Automatic Enrolment Will It Work? Fewer employers think there will be very high h opt-out t rates compared with 2011 Most expect 20% or less now But smaller firms expect much more Small firm employer advocacy unlikely And the first signs of rebellion in the ranks But most will probably try to comply, reluctantly, doing the bare minimum 11

12 Conclusion Some Themes From The Research Attitudes to pensions are negative to hostile, many features of current regime disliked The new retirement reality is recognised, longevity driving new thinking and attitudes to work Recent reforms are welcomed, but do not go nearly far enough, appetite for radical reform evident Themes 2 Awareness and understanding of auto enrolment is increasing, i but so is the understanding of the magnitude of the task Expected employee opt-out rates are decreasing, suggesting lower levels of opt- out in larger firms. Smaller firms will see higher opt-out rates, affordability remains an issue for employees 12

13 Malcolm Small Director of Policy, TISA M: