The freezing of the pensions lifetime allowance may seem like a problem that would be nice to have. For most, the problem will be whether they can afford to save enough to enable retirement, not whether they will be able to retire with a certain level of income or lifestyle. But the announcement to freeze the lifetime allowance at its current level of £1,073,100 until 2025/2026 does have the potential to impact the retirement and savings plans not only of those currently approaching retirement, but also of those employees who may be targeting a pot size that may not now be available to them in a tax-efficient manner.
Individuals can only make informed decisions about their retirement plans if they have the necessary knowledge and information to do so. Employees who are aged 50 or over with defined contribution (DC) pension savings can make use of Pensions Wise, which provides free and impartial guidance about DC pension options. But age 50 may be ‘too late’ in the planning journey and the guidance available will be limited in that it is not financial advice.
Employers should be aware that they are unlikely to be authorised to give financial advice. Many employers are, however, now providing enhanced financial education packages through the workplace or third party pension providers. These providers can be a route to individuals obtaining independent financial advice. Employers that wish to provide more information may also wish to consider appointing a selected regulated adviser or panel of advisers, but this is less common and may risk the employer itself straying into a regulated activity which would require FCA authorisation. Employers should undertake thorough due diligence on any third party, both before appointment and on an ongoing basis, and should also ensure that communications are carefully drafted to ensure that they are not endorsing a particular provider.
Lucy Dunbar is a partner at Sackers