Complying with HM Revenue and Customs’ (HMRC) reporting standards around withdrawal of Uncrystallised Fund Pension Lump Sum (UFPLS) is the biggest technical challenge for providers, according to research by retirement solutions provider Dunstan Thomas.
The poll, which was conducted in May 2015, found that 40% of the 15 providers surveyed view UFPLS rules as their biggest issue following the introduction of the new pension freedoms in April.
Employees aged over 55 can take their pension as a UFPLS, which enables members, if their scheme allows, to take their entire money purchase pot as a UFPLS in one go, or take a series of smaller UFPLSs, each of which will have a 25% tax-free element.
The survey also found that only 13% of providers are to launch guidance or other advisory services associated with their retirement saving products before the end of the year.
However, the vast majority (93%) said there is not enough clarity between simplified, focused and full advice to offer new advice-based services.
Some 80% of providers surveyed believe that the pension reforms will be good for business over the long-term and more than two-thirds (67%) agreed that the main benefit of the pension freedoms was the resulting attention and understanding that it has brought to retirement saving.
The research also found:
- 17% of respondents thought interactive illustrations, which encourage savers to play with scenarios and educate themselves through new online tools, are the best way to communicate pensions.
- 8% thought that the HM Treasury’s planned ‘Pension Passport’ initiative was the most positive outcome in helping pension scheme members understand all potential sources of retirement income.
- 8% of providers said that an effective blend of illustrations so that the annuity versus drawdown trade off can be better understood, would give the best outcome for scheme members.
Natanje Holt, managing director at Dunstan Thomas, said: “It is clear that Pension Freedoms has created a huge administrative workload for providers, which they will be still working through deep into the summer.
“However, there is already clearly pent-up demand for product and service innovation and the long-term prospects for the retirement market have improved significantly following the abolition of the pensions death tax and an end to the annuity-dominated at-retirement market.
“The findings also add weight to the old adage ‘there is no such thing as bad publicity’ as many more people are now learning more about how to maximise their retirement savings pots.”