Employees in money purchase schemes will face some big decisions when the new rules on accessing their pensions take effect next April. Employers will also face some challenges in adjusting to the new regime.
From April 2015, employees over the age of 55 will be able to access their defined contribution pension pots, taking out funds without the requirement to purchase an annuity to provide for their old age.
The Government recently announced that the Pensions Advisory Service (TPAS) will be working with the Citizens Advice Bureau (CAB) to provide free and impartial advice to those looking to take advantage of the new pensions flexibility. This service will be underpinned by standards set out in the Pension Schemes Bill that is currently going through Parliament.
However, although the Government has provided this guidance guarantee, there are concerns about the considerable burden this will place on both TPAS and the CAB. Even if employees do seek guidance from these organisations, employers should still expect staff to come knocking at the HR manager’s door, and should start thinking now about how they deal with workers planning for retirement.
Employers sponsoring defined contribution schemes will want to be able to point those needing to make decisions about their pension pot in the right direction, without straying into giving specific advice for which they could be liable. Some may therefore wish to consider setting up their own advisory service, either by recruiting specialist staff or in partnership with a preferred provider.