2017: What Lies Ahead
For adviser use only
In terms of regulatory and Government developments, it’s no exaggeration to say 2016 will feature in the history books, and not just because of the United Kingdom’s historic decision to leave the European Union. We’ve seen a raft of new policy announcements set against an uncertain economic outlook as well as important initiatives such as automatic enrolment and the pension freedoms gathering further momentum.
We enter 2017 with a new Prime Minister, Chancellor and Pensions Minister, as well as a new head at the FCA, meaning Britain starts this year with a completely changed set of top policymakers with the power to reshape the UK financial services industry. They’ve not been frightened to make their mark, clearly evidenced by the decisions to move away from the previous Chancellor’s deficit closing commitments and to scrap his secondary annuity market.
In times of change, individuals and employers need support meaning 2017 should be a year not just of challenges but of opportunity for intermediaries. Aegon stands ready to support you and your clients on the many developments ahead, including the following.
- Pension freedoms have proven an initial success, with individuals increasingly opting for the flexibility of drawdown rather than locking into all-time-low annuity rates. But with freedom comes the responsibility to do the right thing and not to run out of money. I believe 2017 will be the year when drawdown with guarantees will take its rightful place at the heart of advisers’ retirement income armoury, offering security within a flexible product.
- The Lifetime ISA (LISA) is making waves even before its April launch. Opinion is divided between those who see it as a better version of the Help to Buy ISA or as a threat to auto-enrolment if individuals opt out and lose valuable employer contributions. While it may be the right choice for some, it is not the panacea to all savings needs, as the FCA has recognised by building extensive risk warnings into its regulatory regime. There is a role for advice in helping people identify if it suits them and if so to choose an investment strategy to meet diverse savings objectives and to understand the controversial exit charge.
- John Cridland’s review of the state pension age is underway and with ongoing increases in life expectancy, we can expect people to have to wait longer to receive their state pension, making it even more important they have sufficient private provision to meet their retirement aspirations.
- The 2017 review of automatic enrolment is kicking off despite it still not having been fully rolled out. It is key that the industry encourages members to stay in once their contributions rise from 1% to 3% in 2018 and to 5% in 2019. And while 7 million have already benefitted, more can be done to include low earners and to find parallel solutions for the self-employed.
- The Financial Advice Market Review (FAMR) reported back last April, but many of its 28 recommendations to close the ‘advice gap’ in its widest sense have still to be advanced. Of all the 2017 topics, this is the one I believe offers greatest potential to move our industry forward, placing intermediaries at the heart of the solution to our savings and investment challenges. We want to work with intermediaries, Government and the regulator to make the most of this opportunity.
Of course, on top of these and other ‘known’ changes, there will undoubtedly be many more, currently ‘unknown’. However, the need to save for the future has never been greater, presenting huge opportunities for intermediaries to demonstrate their huge added value.