The document discusses potential issues facing the UK pension industry in 2015, including: 1) An expected rise in fraudulent pension scams targeting over 55s who can now access their pension savings. 2) Some pension providers may pause accepting new auto-enrollment business in Q1 2015 to implement new regulatory requirements. 3) Many employees with substantial pension savings may choose to retire earlier now that they can access funds at 55, removing experienced talent from companies.

1. New Year 2015 Predictions;
Pension Industry
By Elliott Silk DipPFS
Head of Employee Benefits

2. Elliott Silk, Head of Employee Benefits at Sanlam said:
Potential new pension scams. Pension liberation means that after
April 2015, more over 55’s will be accessing their pension cash and
there is the potential for us to see a wave of new fraudulent scams.
We have already experienced the dangers of ‘pension liberation’
companies which are set up to dupe people into accessing their
pension with devastating financial effects. We expect to see a new
wave of corrupt boiler room scammers using high pressure telephone
sale techniques to target the 55’s and over. They will promise high
returns in exchange for cash from small pension pots, promising to
invest in non-existent structures such as ‘Eastern European property
ventures’.
Pension Providers close their doors to auto-enrolment. The
Department for Work and Pensions is introducing changes and new
responsibilities for those responsible for certain pension schemes.
Likewise the Financial Conduct Authority are bringing in similar
requirements for providers of contract based workplace pension
schemes. Examples of the changes include a charging cap at 0.75%,
the removal of commission and the abolition of active member
discounts, rules. Those responsible must comply with new
requirements from April 2015. We are concerned that some pension
providers may channel their resources into meeting their new legal
requirements and close their doors to auto-enrolment business in the
first quarter of 2015. Pension providers are required to have their
administration in order, whereas the responsibility of auto-enrolment
lies with the individual business. Pension providers could well close
their doors to auto-enrolment applications whilst they get their own
house in order.

3. Exit of employee talent from UK PLCs. The Pension Freedom
changes in April are being welcomed by many individuals who have
substantial pension savings. We are already providing pre-retirement
advice to those who were once planning to work until their 60’s but
under the change of rules are bringing forward retirement plans
because they can access their pension funds in defined contribution
schemes at 55. For many this is a pure lifestyle choice; why continue
working when you don’t have to? Annuities would have paid many of
these people a poor income amount, whereas being able to draw
down from pension funds offers new flexibility in managing money. We
expect to see a wave of mature talent and key employees retire early
and this is likely to have an impact on UK PLCs next year.
Auto-enrolment; a churn in industry. It will be interesting to see
how the secondary auto-enrolment market pans out. The first
company staging date was in October 2012. These were the largest
sized companies, and most of them appointed advisers to guide them
through the process, the majority of which worked on a 3 year contract
as software or middleware providers. Most of these companies started
several months before their staging date so they could engage with
their stakeholders. What we are going to see is a lot of those contracts
expire in the first quarter of 2015.

4. We think we will see a big churn in the industry with new adviser
appointments and middleware providers. This will create a huge strain
on the industry as large businesses will be coming back to market
again to tender, at a time that smaller companies are seeking auto-
enrolment advice. We think there will be a restriction on accessible
advice for smaller employers, as not all advisers have capacity to take
on the new small company clients at a time when they sorting out their
tender pitches for their existing large clients.
Change in political direction. Steve Webb has been the longest
ever serving Pensions Minister in his role, which has given stability for
auto-enrolment and pension reforms in recent years. The General
Election in May could bring a change in political power. A new
Pensions Minister under a new political leadership is likely to lead to
significant changes to pensions which could affect both the consumer
and the industry.
This article is for information purposes and should not be treated as advice. Individual
circumstances should always be considered prior to purchasing any financial products. For
further information please contact your Wealth Planner.
Sanlam is a trading name of Sanlam Wealth Planning UK Ltd (Reg. in England 3879955) and
English Mutual Ltd (Reg. in England 6685913). English Mutual Ltd is an appointed
representative of Sanlam Wealth Planning UK Ltd which is authorised and regulated by the
Financial Conduct Authority.