The DWP’s announcement on commission, what does it mean for your scheme?

In March 2014 the Government announced a number of changes to the pension system to improve workplace pensions for employees. These changes affect both employer and employee to some degree, and the biggest change that will affect employers is the removal of commission payments to financial advisers.

In the past, many employer-based pension schemes were set up to pay commission at both scheme level and new employee level. This would cover things like scheme reviews, ongoing payments, new joiners and governance meetings. All of which could be covered by commission overall payments received in respect of the scheme.

This is set to change when initial and trail commission are removed in November 2014 and April 2015 respectively. Payments will cease and most advisers will have to review the position with the employers they service.

In most cases, this will likely result in moving to a fee based retainer to cover the services which would have previously been covered by commission.  

Employers affected by these changes need to revaluate the services they are receiving from financial advisers to make a judgement as to whether their fees are appropriate to the level and quality of services being provided.

Robert Simmons
Corporate Pensions Administrator
Telephone: +44 (0)20 7893 3456
Email: contactus [@] broadstone.co.uk

The Previous Pension Minefield - A Survivors Guide

In today's modern workplace individuals change employer ever more frequently so that an individual may change employer numerous times during his/her working life. The days of a 'job for life' that the previous generations enjoyed are long gone.

In most cases, individuals moving employer have pension benefits with their former employers.

With pension transfers becoming more common, employees with benefits in old pension schemes from former employers may decide to transfer these benefits to pension schemes run by their current employer. This can serve to eliminate the additional administration that can result on an employee’s retirement.

In recent years, the Financial Conduct Authority and the Pensions Regulator have heavily scrutinised the area of pension transfers and have especially highlighted the need for good quality advice in this area.

Mindful of this need for greater transparency, many of today’s pension providers will not consider the transfer of benefits for any employee until they receive financial advice from an independent financial adviser. Others will not allow transfers without employer consent.

Employees may be unaware of the value of their pension ‘pots’ and the potential minefield that they may be stepping into when seeking to transfer benefits. Many previous pension schemes may have additional (hidden) benefits that may be lost on transfer to their current employer’s scheme.

As advisers, it is important for us to be mindful of these benefits when reviewing  the previous pension arrangement of a corporate employee and understand when a line is crossed from providing mere factual information and explanation and veering into the area of individual ‘advice’..

Robert Simmons
Corporate Pensions Administrator
Telephone: (0)20 7893 3456
Email: contactus [@] broadstone.co.uk

 

Will April's pension freedoms throw your automatic enrolment scheme off the tracks?

Doesn’t it seem like your automatic enrolment journey is finally chugging along nicely? At the start there was the surprise of just how many new processes you had to learn and how much administration time it seemed to take up. Yet now your consultant has helped you understand those things you thought you knew then realised you didn’t, and finally the whole assessment piece is just a few new employees a month which is taking an hour rather than a day. Your enrolled employees even appear to be engaged and talking about the benefit to them. This auto enrolment thing is easy!

Now we know in order to keep it so we always need to keep one eye on the future and consider how it will affect your company’s scheme. We’ve talked in previous blogs about what the new pension freedoms proposed for April 2015 will mean for your employees, but are there things for the employer to consider?

One thing stands out to me. What happens if an existing employee of 55 or over decides to access their company pension but not retire from work?

Further questions flow from there: Are you aware of whether or not you will need to re-enrol them in to your company scheme? Are your employees aware of the impact this could have on their tax position or what will happen if they use all their savings up? Accessing their pension could reduce their annual contribution allowance to £10,000, do they know this and what are your responsibilities as the employer? What does this mean if you have a salary exchange scheme up and running?

Finally of course is the question your employees will ask you in a couple of months’ time – “Does our pension scheme provide access to facilities to allow all the new pension freedoms in April?”

You may not have heard, but the majority currently don’t….

Now is the time to start thinking about the new freedoms coming in April and how you can keep your automatic enrolment scheme on the right track.
  

Charles Goodman

Consultant

Telephone: +44 (0)20 7893 3456
Email: contactus [@] broadstone.co.uk