Nick Hall, Business Development Director, Wealth Wizards, comments on the importance of digital guidance tools to provide pension savers with education and advice in an ever changing and complex pension environment.
The Spring Budget changes to the pensions tax allowances are to be welcomed but they serve to highlight the ever changing and complex nature of pensions in the UK. There remains the need for more people to have access to the right information, guidance and advice to make informed decisions on their pensions. Only this way will we be putting them in control of their retirement plans.
In his Budget speech, the Chancellor of the Exchequer raised the pensions annual allowance to £60,000, announced the removal of the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill, and increased the money purchase annual allowance (MPAA) from £4,000 to £10,000.
The MPAA is an example of a tax trap for the unwary and it is disturbing to see the percentage of people caught out by it. In 2020/21, around 25% of pension savers aged 55 and over contributed above the MPAA limit, thereby exposing themselves to unexpected tax charges. With the increase in the MPAA, hopefully now fewer pension savers will fall foul of this tax trap – if they know about it.
Whilst financial advice firm clients can consult their adviser, clearly many savers without professional help are accessing their pensions, and making other financial decisions such as reducing or ceasing pension contributions, often in ignorance of the potential consequences.
This is where we see organisations that consumers already trust, can enhance their offering and their attraction to savers.
Engaging their existing and potential customers through digital guidance services, available 24/7 to consumers but resource-lite for providers, organisations can offer vital education and help savers make more informed financial decisions. Importantly, they can help prevent them from making inadvertent and irrevocable mistakes.
As well as benefiting the consumer, digital guidance creates considerable opportunities for organisations, for example, to identify and offer solutions to help fill gaps in customers’ financial needs. Providers don’t need to be authorised to give advice in order to offer digital financial education and guidance. This provides even greater potential to reach and attract a wider range of pension savers and investors.
Wealth Wizards’ Pension Guidance Service, is an example of a digital solution that is trusted by some of the UK’s most prestigious banks, assurers, and advisory firms, to provide expert retirement guidance and advice under their own brands.
The UK’s pension system is not going to become less complicated for savers any time soon. But digital guidance and education tools have the potential to transform the pension landscape, helping savers better understand their financial decisions. By leveraging these tools and supporting consumers, pension providers can not only drive profitability for their business but also make a real difference to people’s lives.
