Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE:AON), has said that yesterday’s Budget announcement of reductions in the Lifetime Allowance and Annual Allowance has added a new concern for more and more people. In addition to just worrying about whether they have saved enough, some will now have to start thinking about how they plan around these new limits.
Debbie Falvey DC Proposition leader at Aon Employee Benefits, said:
“Employers and pension scheme members face many challenges in achieving a decent income in retirement. Usually the focus is on the big problem of simply trying to save enough. Additionally, there are the concerns of whether members understand the schemes and their benefits, and whether they understand their investments. However, for more and more employers there is now the problem of how to get people to engage in planning their financial future and for the employee there is the question of how to make sure they are on track?”
Debbie Falvey continued:
““It can be difficult to keep track of all your pensions if you have worked in more than one place - and even trickier to see how they fit with your overall financial affairs. Keeping track of our money too often equates to a ‘shoebox of shame’ – a pile of statements from various pension schemes and bank accounts that we keep, but never reference or use as the basis for financial planning
“That ‘shoe box of shame’ became even more important yesterday with the Lifetime Allowance reduced to £1 million and the annual allowance for those earning over £150,000 reduced to £10,000pa. There was enough to think about already; auto-enrolment, the new pensions freedoms and a changing landscape for advice mean that individuals need more support than ever with their everyday finances and longer-term planning needs. But until now, no-one has found a way through the pension regulation changes that suits both employers and employees. Employers are finding it increasingly difficult to justify the cost of financial advice for their staff as a result of regulatory change in the adviser market, and they face the dilemma of how they spend their limited budgets.”
Auto-enrolment has also meant that more employees than ever will have to make decisions about their retirement finances and with little or no professional support. Without support from technology, the combined cost and complexity to deliver what employees need is insurmountable.
Debbie Falvey said:
“Technology is the only real answer to this situation – but it needs to be designed to provide the key elements of support an adviser would give - and in an easily accessible and cost-efficient way. Aon Employee Benefits’ Bigblue Touchwork place savings system addresses this issue. Its ‘Money’ module enables employees to keep track of all their personal finances and employee benefits in one portal.
“This allows the aggregation of pension assets which in turn can help members to keep track of how close they are to the new limits. The technology includes around 30 default triggers that flag circumstances when individuals might need professional support and is designed to nudge employees towards greater understanding of what is going on with their finances. These include alerts for the Lifetime allowance and Annual Allowance, so if a scheme member is likely to hit their allowance, on-screen messages advise them to consider their savings strategy.”
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.