2020 is set to bring a number of changes to the state pension scheme. From April 6 it will increase by 3.9 per cent, yet tens of thousands of pensioners could see a fall in their income as the allowance for adult dependants is abolished.
The increase in the pension is generated by the pension triple lock system, which stipulates that the state pension must increase by September’s price inflation, average earnings growth or by 2.5 per cent, depending on which is higher.
In the new financial year, the state pension will match the 3.9 per cent average earning increase recorded in July 2019. However, cuts of up to £70 per week will also come into force which will effectively cancel those increases out.
With such cuts will come a need for those affected to seek out financial advice, and this is where firms like Argent Wealth can extend their hand.
Indeed, Argent Wealth managing director David Hardman told The Parliamentary Review that since 2010, when the triple lock first came into play “the changes to the pension regime” led to an “increase in consumer-led enquiries”. This looks set to be the case again as those currently eligible for the adult dependency increase [ADI] are set to be impacted by new regulations.
Originally in place to provide additional support to those with financially dependant partners, the ADI was closed to new applicants back in 2010 but from April 6 2020 will cease for everyone, no matter the date of claim.
A Freedom of Information request from insurance firm Royal London revealed that over 11,000 pensioners are set to be affected by the change, with those claiming the maximum payment losing out on £3,640 per year. For those receiving the new full state pension increase for 2020-21 who would have also claimed ADI, losses are thought to total £3,296.
Ongoing uncertainty over the future of the triple lock itself is also rife, after a House of Lords committee on intergenerational fairness suggested that it was unsustainable in an April 2019 report. This leaves the future of the UK state pension system up in the air, and will most likely generate more work for financial advisers in future to help people prepare for the impact of possible changes.
Whatever changes come in 2020, Hardman believes the firm and the industry is ready for the impact. This is not only due to the fact that Argent Wealth has its own strategy to keeps up with the changing economic and political landscape with its own specialist investment research team, but also due to its emphasis on long-term relationships with its clients, something which longstanding financial services providers have in common in Hardman’s view.
Hardman explains: “Having been in the financial services industry for over 25 years, you become accustomed to change. The industry itself has had to adapt to evolving circumstances and for those advisers I have met who remain, I believe they are committed to long-term relationships with their clients in order for all to achieve positive outcomes.
“Fluidity, flexibility and diversity, allied with consistent service, are key to ensuring that client objectives can be achieved.
“While very proud, we will not rest on our laurels and will continue to strive to maintain and improve standards where possible to achieve results for our clients.”