howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
I am aware of this Howard and I am always reminding clients to make sure they claim it back. One of many tax breaks that many people miss out on.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
It is indeed a mine field Howard but dumbing down the language to the lowest common denominator is the least of the problems.
The latest worry is in respect of people getting caught out by auto-enrolment and in so doing breaching Lifetime Allowance protection rules that could cost them tens of thousands of pounds, possibly even six figures, in penalties. Add to that the second rate cheap and nasty NEST scheme that people are not allowed to transfer out of and we have a massive potential problem.
The only good thing to say is that action is needed to get people into pension schemes and for most people something, even in a poor scheme like NEST, is better than nothing.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
barry
surely plain english could be used in explaining the nuts and bolts of the new pension scheme?
the man/woman in the street is immediately suspicious when confronted with jargon.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Yes, Howard - we do use that, well good IFAs anyway. The problem is one entirely created by the auto-enrolment system in which no-one will get any advice or explanations and will just be enrolled in a pension scheme by their employer. A couple of things here:
1/ Employers are not allowed to tell employees they can opt out and are at risk of a fine if they do and cannot even provide the documentation to do so. The employee would have to be alert to it and obtain a form from NEST for it.
2/ there is no provision for advice from someone who knows about these things unless an employer pays an adviser to come into the workplace to meet and explain regularly. Some employers do this now incidentally but most do not and will not.
3/ Auto-enrolment is done every 3 years and the employee has to be ahead of the game and realise this. Just one mistake leading to a contribution being made into NEST could result in LTA protection being invalidated and that could cost them a huge amount of money in penalties.
4/ I have to laugh at the absurd example of language used in the article. If 'the the pension builds up' is used by an IFA when describing equities or stocks and shares to a client there would be a potential mis-selling claim. Imagine, on a simple level, someone not being told that their pension is invested in stocks and shares and do not receive an explanation of how these work and they find on their annual statement one year that because of a market crash the value of their pension has fallen and not 'built up'. Its a minefield. The point is you can over simplify language to the poiont that someone does not know what they are actually getting into. The 'common terms' such as equities and stocks and shares must be used and people told what they mean.
The fact is that pensions are invested in shares for a good reason. People need to have this explained to them and how these things work. It is also important that all risks associated with an investment are explained and questions asked before a 'risk profile' is established that is suitable for the client's attitude and timeframe. Something called 'capacity for loss' is another associated issue that must be assessed. This is a complex matter to get right and this is important because the potential for investment growth is directly linked to the level of risk someone takes, as is the potential for associated loss. With the new NEST scheme a lot of people will not really know what they are getting into and will end up in poorly invested pensions in funds that may not even keep place with inflation over the long term.
Keith Sansum1
- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
this is quite a mine field
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