Retirement and investment software provider Dunstan Thomas warned this week that advisers, providers and administrators of Alternatively Secured Pensions (ASPs) will be forced into advisor and administration meltdown by changes demanded by the new Finance Bill which come into effect on 6th April.
Not only will advisers need to inform clients of the changes and their options but administrators will need to update their systems and processes and then start transferring funds of all ASP clients, all in less than three months time, from 6th April onwards.
ASPs will be scrapped at the start of the individual ASP holder’s drawdown pension year in which 6th April 2011 falls. All ASP holders will need to move funds out of their existing arrangement into a capped or flexible drawdown scheme before their next drawdown year, which could be as early as the 7th April 2011. So some ASP administrators will be making these changes simultaneous with the tax year end changes which already generate a glut of activity.
The burden will also fall heavily on advisers who may find themselves caught in the middle -interpreting the options for clients on the one hand and being exposed to administrative chaos on the other. Some may even find themselves using providers that do not want to offer all options straight away post 6th April.
In addition, complexities associated with reviewing clients’ current income limits compared to their new, probably increased, income limits and to then pay the difference, will add to the administrative nightmare, says Dunstan Thomas.
Administration and client communication problems will deepen still further if administrators’ systems, documents and processes have not been updated in time to incorporate these changes. Clients will have the option to go into a capped drawdown or flexible drawdown arrangement, if the provider chooses to provide flexible drawdown from the 6th April.
Flexible drawdown arrangements are further complicated by the need to prove £20,000 annual pension Minimum Income Requirement (MIR) before being allowed to extract more than the 100% of Government Actuary’s Department (GAD) approved figures offered within a capped arrangement.
Natanje Holt, managing director, Dunstan Thomas, explained:“To see the end of ASPs is a positive step for the industry and the Government has listened well and acted quickly. However they have moved far too swiftly for the industry to implement the necessary changes effectively. ASP clients in particular may feel aggrieved when their cases are not handled efficiently. As it is, all parties have less than three months to prepare for multiple changes demanded by the Bill.
“Systems and processes will stretched to the limit with changes associated with Pension Input Periods, the changes around capped drawdown, implementing flexible drawdown and monitoring of MIR documentation.
Denise Gravatt, head of SIPP administration from platform Ascentric added to this: “As we are relatively new to the market we are in the fortunate position of only having a few ASP clients, but I do have sympathy for the larger providers as it will be very difficult for them to process these Finance Bill and tax year end changes simultaneously and then feed all these changes through to their payroll systems in time.”
Dunstan Thomas is already working flat out with many of its clients to ensure compliance when the new Finance Bill goes on the statute book.