The first of four MALG15 workshops, considering: Unlock your pension- who stands to benefit?"

1. Pensions and Money Advice
A
new
challenge
for
advisers
and
creditors

2. For the debt adviser
A
poten4al
mine
field

3. • For
most,
pensions
are
essen4ally
just
long
term
savings
• Using
savings
to
repay
debt
or
choosing
alloca4on
of
available
income
between
saving
or
repaying
debt
is
not
a
new
challenge
for
money
advice...
• But
new
pension
freedoms
mean
more
op4ons
to
access
pension
savings
a@er
age
55,
and
• Increased
auto-­‐enrolment
means
more
debtors
are
being
encouraged
to
save
into
a
pension
• Advice/guidance
to
debtors
is
important
in
these
areas
• But
needs
care
to
help
client
consider
wider
implica4ons
and
also
to
ensure
that
adviser
keeps
within
regulatory
boundary

4. Pension Freedoms
• Op4on
to
access
DC
pension
savings
in
full
or
in
part
a@er
age
55.
• So,
op4on
to
use
pension
savings
to
repay
debt
• FCA
report
204,581
accessed
pension
savings
in
first
3
months
(95,731
in
same
period
2013)
• ABI
es4mate
£5bn
pension
savings
accessed
in
first
6
months

5. Automa6c Enrolment
Started
2012
-­‐
now
over
5.4
million
auto-­‐enrolled
across
58,000
larger
firms;
-­‐
1.8
million
smaller
employers
enter
AE
by
2018
Minimum
Contribu4ons
Date
Employee
Contribu4on
%
of
qualifying
earnings
Employer
Contribu4on
%
of
qualifying
earnings
Un4l
September
2017
1%
=
0.8%
a@er
current
tax
relief
1%
Sept
2017
–
Sept
2018
3%
=
2.4%
a@er
current
tax
relief
2%
Sept
2018
onwards
5%
=
4%
a@er
current
tax
relief
3%

6. Regula6on -­‐ Keeping within FCA rules needs careful
aAen6on...
PENSION
ADVICE
Advice
on
acquiring
or
disposing
of
rights
under
a
personal
pension
scheme
is
generally
regulated
advice
.
See
PERG
12.1
&
12.3
DEBT
ADVICE
CONC
8.3.2R
A
firm
must
ensure
that:
(1)
all
advice
given
and
ac4on
taken
by
the
firm
or
its
agent
or
its
appointed
representa4ve:
• (a)
has
regard
to
the
best
interests
of
the
customer;
• (b)
is
appropriate
to
the
individual
circumstances
of
the
customer;
and
• (c)
is
based
on
a
sufficiently
full
assessment
of
the
financial
circumstances
of
the
customer;
CONC
8.3.7R
A
firm
must:
...
(2)
before
giving
any
advice
or
any
recommenda4on
on
a
par4cular
course
of
ac4on
in
rela4on
to
the
customer's
debts,
carry
out
a
reasonable
and
reliable
assessment
of:
• (a)
the
customer's
financial
posi4on
(including
the
customer's
income,
capital
and
expenditure);
...
• (c)
any
other
relevant
factors
and
don’t
forget
the
interest
of...
PROFESSIONAL
INDEMNITY
INSURERS

7. Impact of pension changes on DRO and bankruptcy
advice
DRO
–
guidance
from
Insolvency
Service,
March
2015
• Where
the
debtor
is
over
55
and
has
access
to
an
undrawn
personal
pension
fund
both
official
receivers
and
DRO
intermediaries
should
consider
whether
right
to
access
pension
means
that
debtor
is
able
to
repay
debts.
If
so:
• In
bankruptcy
the
official
receiver
will
consider
whether
it
would
be
appropriate
to
seek
an
annulment.
In
a
DRO,
an
intermediary
should
contact
the
DRO
Team
to
establish
whether
the
official
receiver
will
grant
the
applica4on.
Bankruptcy
• Conflic4ng
High
Court
decisions
on
whether
bankrupts
can
be
forced
to
elect
to
take
pension
to
be
included
in
IPO
• Raithatha
v
Williamson
(April
2012)
-­‐
court
can
force
a
bankrupt
to
take
part
pension
• Horton
v
Henry
(December
2014)
-­‐
declined
to
follow
Raithatha.
• Now
wai4ng
on
Court
of
Appeal
determina4on

8. Two Examples
Mark
is
56
years
old.
He
has
£20,000
in
a
personal
pension
plan
and
debts
of
£19,000.
Should
he
take
his
pension
benefits
to
repay
his
debt?
Samantha
is
26.
She
is
auto-­‐enrolled
into
a
pension
scheme,
currently
paying
1%
(0.8%
a@er
tax
relief)
of
her
qualifying
earnings.
Should
she
stop
pension
saving
to
repay
her
debt?
How/should
any
advice
or
guidance
be
reviewed
in
the
future?

9. Moving Forward...
• How
do
money
advisers
best
meet
the
client
need
for
advice?
• Need
to
brief
managers
and
trustees/
directors?
• Agencies
and
na4onal
organisa4ons
to
determine
prac4cal
approach?
• Would
auto-­‐enrolment
guidance
benefit
from
money
advice?

10. And the creditor?
A
poten4al
mine
field

11. A recovery tool?
• Will
creditors
expect,
or
pressure,
consumers
to
access
pension
savings
to
repay
debts?
• If
a
consumer
is
on
a
reduced
repayment
plan,
how
will
a
creditor
react
to
a
further
reduc4on
in
repayments
where
the
borrower
is
auto-­‐enrolled
on
a
pension
scheme?
• Are
they
likely
to
be
realised?

12. Probably not
FCA
expecta4ons
are
fairly
clear:
• CONC
7.2.1R(2)
–
A
firm
must
establish
clear,
effec4ve
and
appropriate
policies
and
procedures
for
…
the
fair
and
appropriate
treatment
of
customers….
• 7.3.10R(3)
–
A
firm
must
not
pressurise
a
customer
..to
raise
funds
to
repay
the
debt
by
selling
their
property….
• Above
all:
Principle
6
–
A
firm
must
pay
due
regard
to
the
interests
of
its
customers
and
treat
them
fairly.
But
what
about
creditors
that
are
not
subject
to
the
FCA?

13. But is it as simple as that?
Consumers
might
choose,
independently,
to
dip
into
the
pot
to
repay
a
debt
or
indicate
an
inten4on
to
do
so.
• What,
if
anything,
should
the
creditor
do?
• Would
the
creditor
know?
• How
should
the
creditor
treat
the
payment?
• Should
the
creditor
suggest
that
the
consumer
gets
some
advice?
• Where
to
signpost
the
consumer
for
advice?

14. It’s not just about debt
Creditors
will
also
have
to
think
about
the
effect
of
the
pension
freedoms
on
lending
into
re4rement.
• Projected
pension
earnings
might
be
relevant
to
assessing
affordability.
• Drawing
down
might
affect
lending
decisions
• May
also
affect
ongoing
affordability
for
lending
decisions
already
made.

15. Some challenges…
• Gelng
informa4on
to
assess
affordability.
• Living
for
the
now
–
spend
rather
than
save.
It’s
a
consumers
choice?
• Financial
capability
–
are
consumers
equipped
to
make
these
decisions?
• Availability
of
accessible
quality
advice
and
appropriate
signpos4ng?