Queen's Speech: How new laws will impact your pension pot
The government’s plans to loosen financial regulation, revealed in the Queen’s Speech, will have a positive impact for pension savers, according to experts.
The Financial Services Bill aims to strengthen UK financial services to "[continue] to act in the interests of all people and communities" and could provide a further boost to annuity rates.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “There is a glimmer of hope on the horizon for those wanting to include annuities in their retirement strategy.”
Annuities have already risen in recent months, and beginning to look once more as a competitive option for retirement.
The Financial Services and Markets Bill will include reforming Solvency II, which is already the subject of an ongoing consultation.
Solvency II governs how much capital insurance companies must hold and the types of assets they can invest in.
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Morrissey added: “Its introduction in the aftermath of the global financial crisis was designed to make sure insurers were well capitalised but was met with concern that it would depress annuity incomes.
“The ongoing Government review said reform could result in a material release of as much as 10% to 15% of the capital currently held by life insurers unlocking potential to invest billions of pounds in long-term assets.
“Such change could lead to a bounce in incomes which have already been on the rise in recent months as interest rates increase.”
Some pension experts were expecting some announcements on the reforms to auto-enrolment (AE) and many were hoping for a second pensions bill but it was not the case.
Royal London director of policy and external affairs Jamie Jenkins said: "The recommendations of the 2017 AE review – removing the lower earnings limit on contributions and reducing the minimum entry age to 18 – have still to be firmly planned.
"It looks increasingly unlikely that this will be implemented by the mid-2020s target.
"Beyond that, we need to give employers and employees notice if we are to move contribution rates up from their current 8% level, a move which now seems to carry widespread consensus."
He added: "The cost of living crisis we face today is rightly the focus of attention for now, but we face a bigger cost of living crisis in later life if we don't start to address the adequacy of pensions saving soon."
Chieu Cao, CEO of Mintago said: “The exclusion of retirement policy from the Queen’s speech is disappointing. The long-promised 2017 auto-enrolment reforms could have given employees an opportunity to benefit massively from earlier savings opportunities and higher contributions. Now, it is looking less and less likely that such changes will occur within this decade.
“Words are no longer enough. The government must push forward legislation to lower the minimum autoenrollment age. Mintago’s recent survey found that over a third (36%) of millennials are finding financial anxiety is negatively impacting their job performance. Surely, then, encouraging younger members to take charge of their finances as early as possible would reduce some of this stress and better prepare them for the future.
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Age UK said that more than two million older households will not be able to cover their daily essential spending by the end of the year.
The charity estimates that the poorest older households – defined as those with at least one inhabitant aged 60 or over – will have to spend more of their household income on essential goods and services, from 67% in 2021/2022 to 79% in 2022/2023.
The charity says it is “deeply concerned” that older people will have no “wiggle room” for unexpected expenses due to the higher costs of living.
Hargreaves Lansdown said it is important to start contributing to a pension as early as possible and to increase those contributions on a regular basis.
Morrissey said: “It takes years of regular saving to build up such a pension but these millionaires show it can be done. Auto-enrolment should boost the number of people able to reach this important milestone in the coming years as we see more people contributing throughout their entire careers.
“There are issues to be aware of though. The current lifetime allowance currently stands at £1,073,100. Pensions worth more than this will attract a tax charge. This does not necessarily mean you should 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 paying into a pension?