AIFA calls for a budget for pensions

The Association of Independent Financial Advisers (AIFA) has called on the government to deliver a budget for pensions.

AIFA has supported the current Pensions Bill and worked with the government to provide a better retirement outlook for UK consumers. However, AIFA has concerns about the impact of some of the proposals and calls for greater support for investments.

Chris Cummings, Director General of AIFA, said: "It is certainly a challenging time for the Chancellor to deliver his first full budget. We join others in the industry in urging him not to make further radical changes that could upset the market. However, what changes he does make should seek to encourage investment among business and consumers.

"While we support the principles behind the current pensions reform, with more people taking sensible decisions to provide a better pension for themselves, it still requires clarification. There are layers of detail that need to be stripped away if the well intentioned principles are not to undermine the good that exists today."

Means testing and pensions

"There are people who would be financially better off by opting-out of Personal Accounts because of the means tested benefits systems, especially those that are close to retirement age in 2012. A problem is the lack of advice available to employees on whether it would be financially better for them to opt-out.

"Those who opt-out of Personal Accounts and save responsibly for their future should not be worse off in retirement than those who opt-out and rely on state benefits. We accept that it may not be profitable for many IFAs to provide advice to employees on Personal Accounts, but it is important that employees receive adequate information, or where possible, individual advice. This could be achieved through pro-bono work of IFAs, or paid for by employees or employers."

Pension contributions - levelling down

"We are concerned about the risk that good employer-sponsored pension schemes may "level down" to the minimum contribution requirements of Personal Accounts. Employers may be willing to finance their current pensions contributions but following auto-enrolment, may not be able to afford the costs of making the same level of contribution if all of their employees were to join their scheme.

"Would they close their existing scheme to new members? Would they reduce their own contributions? Would they exit current pension provision entirely and only facilitate Personal Accounts? These are risks that need to be factored into the Government's decision making."

Personal Account Advice for Employers and Employees

"Employers will need advice on whether their existing scheme is sufficient for an exemption from Personal Accounts. Currently, employers that pay for financial advice for their employees can only reclaim corporation tax if the advice costs less than £150 per person. If the advice costs more than £150, then none of the cost can be off-set against corporation tax. Also, employees are taxed on any sum over £150.

"This is different to most other tax allowances, which allow tax to be claimed back to a proportion of the cost if the total cost is higher than the threshold. We recommend that the Government change this anomaly in the forthcoming Finance Bill, which will encourage more firms to provide financial advice to their employees."

Capital Gains Tax

"The Chancellor's CGT proposals in the pre-budget report would not only affect many of our members, who will potentially be subject to a significantly higher tax bill on the sale of their business, but it will also be a huge tax-hike for many entrepreneurs."

Thoresen Review

"We look forward to confirmation from the Chancellor that he will accept the proposals from the Thoresen Review. The proposed Money Guidance service is an opportunity to educate consumers about their financial needs. A better educated public will then realise the value of professional financial advice, and understand the advice given to them.

"As Thoresen states in his report this service will be sales free. The Money Guidance service will provide a basic level of financial information and act as a signpost for consumers to access more detailed personalised financial advice. We are pleased that the Thoresen Review has recognised and understood the true value which can be gained from the intermediary community."