Business owners disadvantaged after industry pulls back OMAs
The hard line taken by the Pensions Authority on one member arrangements (see page 60) came as surprise for pension providers, like Davy, who had invested significantly in ensuring the compliance of OMAs. As a result, the industry ceased offering new OMA set-ups, and instead some have, in consultation with the Authority, shifted their focus to establishing Master Trust arrangements.
“This is directly impacting business owners who may not have a company scheme in place but wish to contribute to a pension of their own,” says
Paula Finlay, Director of Pensions, Davy Private Clients. “This group of contributors are significantly disadvantaged as they currently cannot establish an OMA to receive employer contributions.
“The Master Trust structure itself is complex and expensive to run, which
has narrowed the choice of pension providers operating in this market and is pushing the smaller schemes to consolidate into Master Trusts run primarily by larger providers.”
Though there are many changes on the horizon for pensions, Finlay’s advice to clients is always to have a financial plan in place which is aligned with retirement goals. “Having a plan will link your goals with your investment strategy to give you the best chance of achieving your desired financial outcomes in retirement,” she advises.
Finlay favours evening out tax relief on personal or AVC contributions instead of the weighting in favour of older people. “Due to the tax relief on contributions and the tax-free growth on pension investments, it is much more beneficial to make larger contributions earlier on if you can do so. Lifting of tax limits on younger to midcareer pension contributors would be a step in the right direction,” she says.
In Finlay’s view, proposals for a reduction in the tax-free pension lump sum should be resisted. “For those who are not yet at retirement, at a time when we need to be encouraging people to save for retirement, retaining it would also be an incentive towards funding up their pension fund.”