Constantly changing rules and u-turns on A-Day issues is putting people off saving for retirement, claims financial services firm Edward Jones.
Almost a year after pensions simplification first came into effect on 6 April 2006, Edward Jones says the changes have made “virtually no difference” to how people save for their future.
Andrew James, retirement planning manager at Edward Jones, says the tiny minority who have taken advantage of the changes have been the extremely wealthy, mainly because for the general public pension legislation still remains a complex area.
He says the “hype” around A-Day has "gone straight over the heads of the very people it was supposed to help", and instead it is those among the top 5% of earners who are making changes to their pension provisions, with some investing anything up to £400,000 into individual funds because the new rules make it extremely advantageous for them to do so.
But he warns: “For those saving £50 a month into their pension plan it has made absolutely no difference. We estimate 95% of people have made no changes to their arrangements post A-Day.”
And he points out the lack of retirement saving is mainly because of the “constantly changing rules and the failure to educate the public” on the importance of taking responsibility for their retirement savings.
James says ever since the proposed A-Day changes were announced “the government has not been very consistent with the rules”, with one of the first problems being caused by the government’s withdrawal of the ability to include residential property and esoteric assets - such as antiques and vintage cars - into pension funds, as many people had taken steps to do this before the government changed its mind.
In addition, he says: “There have also been changes made and then negated with regard to term assurance, and passing pension funds on. All of these advantages were put in place to entice people to save but again were withdrawn. We would like to see better legislation in place to help people save for retirement without sudden changes.”
James warns people are still very confused about this whole issue and are therefore making little or no provision for their retirement, which he says is disappointing as saving for retirement can be highly tax efficient and the earlier people start the easier it can be for them.
He adds: “We would like to see clearer guidelines on pension rules to allow the industry time to talk to people about saving for the long-term, with assistance in educating individuals in the UK about the many positive advantages there are for saving for retirement.”
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