Government plans to ease financial regulations, revealed in the Queen’s Speech, will have a positive impact for pension savers, experts say.
the Financial Services Bill aims to strengthen UK financial services to “[continue] to act in the interest of all people and all communities” and could give a new impetus to annuity rates.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “There is a silver lining on the horizon for those who want to include annuities in their retirement strategy.”
Annuities have already increased in recent months and are beginning to emerge again as a competitive option for retirement.
The bill on financial services and markets will include the Solvency II reform, which is already the subject of an ongoing consultation.
Solvency II governs the capital that insurance companies must hold and the types of assets in which they can invest.
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Morrissey added: “Its introduction in the aftermath of the global financial crisis was designed to ensure insurers were well capitalized, but there were fears it would depress annuity revenues.
“The ongoing government review said the reform could result in a significant release of 10%-15% of the capital currently held by life insurers, unlocking the potential to invest billions of pounds in long-term assets. .
“Such a change could lead to a rebound in revenues which have already increased in recent months as interest rates rise.”
Some pension experts were expecting announcements on Self-Enrollment (AE) reforms and many were hoping for a second pension bill but nothing came of it.
Director of Policy and External Affairs at Royal London Jamie Jenkins said: “The recommendations of the 2017 EI Review – removing the lower earnings limit on contributions and lowering the minimum entry age to 18 – have yet to be firmly planned.
“It looks increasingly unlikely that this will be implemented by the mid-2020s target.
“Beyond that, we need to put employers and employees on notice if we want to raise contribution rates from their current level of 8%, a move that now appears to enjoy broad consensus.”
He added: “The cost of living crisis we face today is rightly the focus of attention at the moment, but we face a bigger cost of living crisis later. in life if we don’t start addressing retirement savings adequacy soon.”
Chieu Cao, CEO of Mintago, said, “The exclusion of retirement policy from the Queen’s Speech is disappointing. The long-promised self-enrollment reforms of 2017 could have given employees the opportunity to benefit massively from earlier savings opportunities and higher contributions. Today, it seems less and less likely that such changes will occur during this decade.
“Words are no longer enough. The government must advance legislation to lower the minimum age for automatic enrollment. Mintago’s recent survey found that more than a third (36%) of millennials find that financial anxiety negatively impacts their job performance. Certainly encouraging young members to take charge of their finances as early as possible would reduce some of that stress and better prepare them for the future.
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Age UK said more than two million elderly households will not be able to cover their essential daily expenses by the end of the year.
The charity estimates that the poorest older households – defined as those with at least one resident aged 60 or over – will need to spend more of their household income on essential goods and services, from 67% in 2021/2022 at 79% in 2022/2023.
The charity says it is “deeply concerned” that older people will not have “wiggle room” for unexpected expenses due to the higher cost of living.
Hargreaves Lansdown said it was important to start contributing to a pension as early as possible and to increase those contributions regularly.
Morrissey said: ‘It takes years of steady saving to build up such a pension, but these millionaires show it can be done. Auto-enrollment should increase the number of people able to reach this milestone in the years to come, as we see more people contributing throughout their careers.
“There are issues to be aware of. The current lifetime allowance currently stands at £1,073,100. Pensions of a higher value will incur a tax burden. This doesn’t necessarily mean you have to stop contributing to a pension if you hit the limit, but it’s probably worth discussing your options with a financial adviser.
Watch: When should I start contributing to a pension?
