People will take pension cash 'beyond tax-free allowance'

A Retirement Survey, which polls some of the UK’s leading pension and annuity professionals, found that 86% agree or strongly agree that the UK will see an increase in individuals taking cash beyond their tax-free allowance. Some 58% agreed, or strongly agreed, that members will take UFPLS (uncrystallised funds pension lump sum) benefits from schemes and reinvest the realised funds in other products such as Isas, according to Equiniti’s 2015 Annual Retirement Survey.The survey was carried out between 28 May and 22 June 2015 and sought the views of professionals throughout the annuity sector including product and service providers, retirement planning consultants, employee benefit consultants, regulators and influential bodies. For 2015, 50 responses were received.The survey found that 64% of those surveyed believe that schemes should offer the ability to take multiple UFPLS payments in order to allow members to take benefits without crossing tax thresholds. Some 82% believed that members will take a more flexible approach to retirement and expect to take some benefits from pension schemes during a period when they will continue to work at least part-time before they fully retire.{desktop}{/desktop}{mobile}{/mobile}Some 58% agreed, or strongly agreed, that trustees feel the industry providers are not adequately geared up to deal with recent pension reform with 34% believing that members do not expect to be able to execute a full drawdown from their existing scheme, instead expecting to set up separate drawdown vehicles. In addition, 58% believe that pension schemes have been slow to adapt default funds to reflect the new freedoms and the reduced reliance on annuity products.Regarding annuity products, the research revealed that 46% of respondents believe that annuities will no longer be the first product of choice as an individual begins to plan and move into retirement with 30% agreeing, or strongly agreeing that the inclusion of new features for annuity-style products to permit variation in lifetime income levels and unlimited guarantees adequately adapts these products for the new pension freedoms.Further findings were:· 72% believe that traditional drawdown products no longer meet the requirements of the marketplace as there is a need for different pricing models to allow for smaller pot sizes.· 64% believe that drawdown products now form part of all retirement conversations, with 78% agreeing, or strongly agreeing that drawdown should now be given an equal profile to annuities as an alternative product.Nigel Pearce, life and pensions Director, Equiniti, said: “Those with small pension pots are increasingly using the new freedoms to take their whole pots as cash, regardless of the tax implications, to use for a multitude of purposes.“The vast majority of respondents agreed that people will continue to draw cash sums over and above their tax-free allowance. While there are a few who are looking to manage their cash assets, many are simply using them to pay off debts or to make a significant purchase, such as a car. The average DC fund size is only £30,000. It is those with larger DC funds that are likely to be taking independent financial advice and therefore fully understand all of the tax implications involved.”

People will take pension cash 'beyond tax-free allowance'

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