‘A’ day has made no difference to how we save for retirement, says expert

The much heralded changes brought about to the UK’s pension industry on 6 April 2006 and known as A Day have made virtually no difference to how people save for their retirement according to one leading expert.

Andrew James, retirement planning manager with financial services company Edward Jones, says the tiny minority who have taken advantage of the changes have been the extremely wealthy, while pension legislation still remains a complex area.

“The hype about A Day has gone straight over the heads of the general public – the very people it was supposed to help.” said Mr James. “Those making changes to their pension provisions have been among the top five per cent of earners. We have seen them put anything up to £400,000 into individual funds as it is now extremely advantageous for them to do so.

“But for those saving £50 a month into their pension plan it has made absolutely no difference. We estimate 95 per cent of people have made no changes to their arrangements post A Day.”

Edward Jones reports there has been a noticeable increase in the number of self invested personal pensions, (SIPPS), being opened but only for those with sizeable pension funds as these give the individual far greater flexibility – but overall the numbers are still worryingly small.

According to Mr James the lack of retirement saving is because of the constantly changing rules and the failure to educate the public enough on the importance of taking responsibility for their retirement savings.

“Ever since the proposed A Day changes were announced the Government has not been very consistent with the rules,” said Mr James. “One of the issues has been over the ability to include residential property in the UK or overseas, antiques, vintage cars etc, into pension funds and many people actually took steps to do this, however this allowance was then withdrawn.

“There have also been changes made and then negated with regard to term assurance, passing pension funds on etc. All of these advantages were put in place to entice people to save but again were withdrawn. We would like to see better legislation in place to help people save for retirement without sudden changes.

“People are still very confused about this whole issue and are therefore making little or no provision for their retirement.

“This is disappointing as saving for retirement can be highly tax efficient and the earlier people start the easier it can be for them.

“We would like to see clearer guidelines on pension rules to allow the industry time to talk to people about saving for the long –term, with assistance in educating individuals in the UK about the many positive advantages there are for saving for retirement.”