The wide-ranging changes to pensions announced in the UK Budget on 19 March took the industry completely by surprise, and may have an impact in the Channel Islands, BWCI have warned.
Announcements made by George Osborne resulted in a 55% fall in the share price of Partnership Assurance, one of the two suppliers of annuities to Channel Islands residents.
The proposals set out in the Chancellor’s speech could also influence the pension reviews being conducted in both Jersey and Guernsey – particularly the proposal to make it no longer obligatory for people to purchase an annuity.
BWCI Pensions Partner, Michelle Galpin, said: “I think the drop in insurers’ share prices was a knee-jerk reaction to the announcement that people will no longer be forced to buy an annuity. However, the Budget announcement does provide insurers with an opportunity to be innovative and design new products for this new pensions landscape.”
Pensions are under review in both Bailiwicks, and the dramatic changes proposed in the UK may have an impact on politicians' policy-making in Jersey and Guernsey. The changes could also mean that the UK would have a more liberal system for taking retirement benefits than the Channel Islands, leading residents with UK pensions who had planned to transfer their benefits to the Channel Islands have second thoughts.
Mrs Galpin, said: "This is a really fundamental change that nobody was expecting and there may be some unintended consequences. At first sight the ability to dip into your pension pot like a bank account appears attractive to those approaching retirement. However, there are already concerns being expressed that this could be storing up problems for the future, with more pensioners ultimately having to rely on State benefits in retirement if they do not manage their pensions pot well. They will also need to consider whether there are any adverse tax implications of taking their pension pot as a lump sum.
“It is clear that these are only very high-level proposals but they could have far-reaching implications in the Channel Islands.”
In conjunction with the Budget announcement, the UK Government launched a 12-week consultation process to seek the pensions industry's views. Other Budget proposals for pensions include:
- a less attractive proposal for those approaching retirement: an increase in the earliest age at which a person would be allowed to take benefits from 55 to 57 by 2028, in line with the changes in State pension age to 67 in the UK.
- a ban on the transfer of benefits from some defined benefit schemes to a defined contribution arrangement.
- A requirement for pension providers to provide free impartial guidance to everyone at retirement, which could be a significant
Full details of the proposal can be found at: