The government is planning reforms which will have a significant impact on the pensions environment.  The proposal is that from 2012 all employers will have to provide a workplace pension, automatically enrol all of their employees who meet certain criteria and contribute a minimum of 3% of salary (between a lower and upper limit). 

The government has now set up the Personal Accounts Delivery Authority (PADA) which will set up a pension scheme, known as 'Personal Accounts', which employers will be able to use to fulfil their new obligations, if they do not wish to set up or maintain their own pension provision.

Apart from the legislation to establish PADA, none of this has yet been enacted in legislation, although the Bill to do this is due to be published soon.  Therefore, the exact nature and timing of these reforms are up for debate and subject to Parliamentary approval.  Also much of the design of the Personal Accounts scheme will not be set in primary legislation, but will be designed by PADA.  So, there is still uncertainty about what the Personal Accounts scheme will look like, for example the investment choices and the level and structure of charges (although the aim is for Personal Accounts to be a low cost scheme).

For an individual seeking financial advice today there may be many unknowns about their circumstances in 2012, if the legislation does come into force then.  It is likely that if they are employed at that time, their employer will offer a workplace pension with an employer contribution; this might be through a Personal Account or through another workplace pension, which will have to meet specific minimum standards if it is to qualify as an alternative scheme.

Where an individual has a need and a desire to save (be that generally or specifically for retirement) there should be no question of delaying saving until 2012.  Putting off saving would not be in the best interests of the individual. 

Advisers must give their clients advice that is suitable.  As part of this advisers will assess the clients current circumstances, for example whether they have access to a pension through their employer.  It is for advisers to assess the extent to which the future pension reforms are a factor in the advice given to each of their clients.  The extent to which they are a factor will increase as the legislation is passed, the design of Personal Accounts become clearer and we get closer to this implementation date.  Advisers will need to be aware of the developments as they happen to enable them to make reasonable assumptions when giving advice.

Whether or not the future legislation and Personal Accounts have an impact on the advice given to a particular client at a particular point in time, it may have some effect on that client’s circumstances in the future.  Therefore, when advisers are talking to clients about the need to review their financial arrangements regularly, they may feel it is relevant to refer to the proposed pension reforms as a specific example of a potential reason for reviewing plans in the future. 

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