TISA calls on the FCA, the Government and the industry to change four pension decumulation policies to benefit consumers

November 9, 2021

TISA calls for a regulatory timing alignment and enhanced content to wake-up packs
TISA calls for the MPAA limit to be levelled up to the previous limit of £10,000
TISA calls for HMRC to abolish Block Transfer rules
TISA calls for HMRC to update the PAYE process for pension withdrawals

The Investing and Savings Alliance (TISA), the cross-industry membership body, calls onthe HMRC, HMT, the FCA, TPR and the DWP to amend four aspects of pension decumulation policy to enhance consumer retirement outcomes.

TISA is calling for the timing of trust-based DC wake-up packs to be aligned to the FCA requirements to ensure all scheme members are provided with a pre-retirement consistent communication journey. An additional section needs to be included to cover life expectancy with a reference to the ONS calculator to prompt individuals to consider how long their retirements might be. Understanding longevity risk is an essential part of retirement planning in today’s world, especially considering that around two thirds of people underestimate their life expectancy.
TISA calls for the MPAA limit to be levelled up to the previous limit of £10,000. This reflects the very different landscape we now have compared to 2017 when the £4,000 limit was introduced. Auto Enrolment contributions have increased significantly, the impact of Covid has greatly impacted on working patterns and withdrawal behaviour, in particular the self-employed and there is a very real risk that for thousands of savers who have the ability and inclination to invest for their futures, they run the risk of unknowingly incurring tax bills for doing so. It also reflects the Government’s expectation of an improving economic backdrop and their intention to review the level on a regular basis to ensure it remains appropriate.
TISA believes the Block Transfer rules, a mechanism enabling an individual to retain a pre-2006 protected retirement age (PRA) or tax-free cash (PTFC) on transfer should be abolished. Anyone with a PRA or PTFC should be able to benefit from the pension flexibility introduced to improve retirement planning and outcomes, yet this old rule restricts that ability for thousands of individuals. The Block Transfer rules in the Finance (No 2) Bill proposes easements for those who hold the new 2021 protection but does not currently propose to extend this to other forms of protection which is not consistent. Furthermore, these requirements can have an adverse impact on Value for Money consolidation exercises.
Trust in pensions is low due to perceived lack of control, transparency, and an inability to easily access information. TISA is calling for HMRC to update the PAYE process for pension withdrawals using dynamic coding to ensure accurate tax deductions are made and large-scale overpayments are avoided. This should form part of their 10- year administration strategy which is intended to create a tax system which is trusted and modern. A pensions tax system which has resulted in over £500 million of overpayments since 2015 cannot be considered as “trusted and modern”.

Renny Biggins, Head of Retirement at TISA said: “Unlike Accumulation where the main beneficial objective is to create a pension pot as large as possible, Decumulation is a much more personalised journey specific to individual circumstances. We are not calling on widescale reform with this particular set of proposals but would like some enhancements made to the existing framework to reflect the significant shifts we have seen since these rules were originally introduced.”

To read the paper in full, please click here.