1. Whether to maintain an investment-linked approach to retirement income or lock into a guaranteed annuity income stream can be a difficult decision.
   With the advent of drawdown and phased retirement options consumers could be forgiven for perceiving their options as limited to one of these two distinct paths. Investment-linked annuities can be viewed as a halfway house providing, in some cases, a guaranteed minimum income with some upside, subject to underlying investment returns. Unfortunately, the number of product providers facilitating this extra choice is limited.
2. Last December’s pensions green paper proposed the introduction of value-protected annuities, a money-back guarantee aimed at paying the annuitant’s dependants a taxable lump sum of the difference between the amount already paid out to the annuitant and the amount left in the pension fund pot.
   Value-protected annuities would appear to be in the consumer’s best interest whilst their introduction is likely to bring about further downward pressure on annuity rates.
   Reduced buying power in the form of lower associated annuity income is likely to reduce associated take-up. This may potentially be offset by the added value of some form of retained benefit, as opposed to an annuitant’s income dying with them.
3. Impaired life annuities benefit from what might be referred to as ‘reverse underwriting’ – the positive encouragement of a potential annuitant to disclose all possible ailments that could result in enhanced buying power – confirming that you smoke or that you are diabetic can result in a significant increase in resultant income.
   It is likely that this specialised market will continue to grow, particularly against a backdrop of market factors pointing towards further downward pressure on standard terms annuity rates.
4. Increased public awareness of the opportunity to boost retirement income by shopping around would be beneficial from an industry and government perspective.
   A large proportion of pension funds offer open market options which, more often than not, are not exercised. The government’s recent drive towards making those approaching retirement aware of such options is a positive move, but one that needs reinforcing wherever possible in the intermediary market place.

1. With 20-year retirement becoming common place, retirement now presents a long-term investment opportunity. Few advisers would recommend a 20-year fixed-term investment pre-retirement, so why would they recommend it post-retirement? Many annuitants need the security that conventional annuities offer, but for others exposure to real assets makes financial sense.
   After all, investment-linked annuities can offer the prospect of income growth that could provide protection against inflation. Also, as investors’ confidence in the markets has returned there has been a resurgence in with-profits annuity sales over the last year. Currently, these mixed asset investment-linked annuities could offer plenty of potential for income increases.
2. There is a strong demand for a ‘live or die’ guarantee of getting your annuity purchase money back. But the current ‘value protection’ proposals are flawed because of the prohibition on lump sums on death beyond age 75 and the proposed 35% tax charge which is penal for standard rate taxpayers.
   Annuities are marvellous for those who live to a ripe old age, but what about those who die soon after retirement? A full ‘value-protection’ option would remove this problem. Bearing in mind that money-back guarantee is about ‘value for money’, not inheritance, the flaws in the present proposals could be removed by introducing a two-tier tax band and allowing a lump sum payment of the remaining balance (if any) on death after aged 75.
3. Several of the big pension providers are also highly competitive in the annuity market making their clients less likely to take up their open market option (OMO). Indeed, consumers who find themselves eligible for impaired rates need to be aware that some enhanced rates are worse than the standard rates offered by these competitive providers.
   The significance of the need for security in a retiree’s decision-making process is often overlooked – will the underwriter’s assessment be right and will the provider be around for as long as the retiree? On average life expectancy is increasing, so as this applies to all lives and medical science continues to make advances, the growth of enhanced/impaired annuities is likely to be finite.
4. Annuities are simple products; they convert a capital sum into an income for life. They are the best choice for those who require both income and security. The financial services industry and the government need to promote this message.
   Unfortunately, the perception of annuities has been adversely affected by those articulating the cause of those who don’t want income from their pension savings and instead want to use them to boost their inheritance. However, my first priority for the government is to sort out ‘value protection’ because a simple ‘money-back guarantee’ option would immediately boost the perception of annuities.

1. At the moment, retirement income products are broadly polarised, with insurance companies assuming the investment and longevity risks for annuity products, and with individuals accepting it under drawdown.
   Clearly, this means that there is scope for product providers to develop new innovative products that share the risk. I think the distinction between annuities and drawdown will blur in the future, with different products providing varying degrees of investment flexibility, income flexibility and mortality cross-subsidy.
   The true test will be whether the new products satisfy a consumer need. In order for a consumer to accept the investment risk, they must be convinced that there is a clear advantage over purchasing a conventional annuity.
2. The concept of value-protected annuities is a good one. It helps providers develop products specifically for those concerned about the value they receive from their annuity if they were to die sooner than expected.
   However, I remain unconvinced of the customer demand for these annuities when their value is compared to other options. This is partly because the 35% tax charge on any lump sum death benefit is likely to be deemed too high for lower rate taxpayers, and partly because the inability of providers to make any lump sum payment on death after age 75.
3. One thing that will not change because of A-day is the needs of our customers. Many of these will continue to require a cost-efficient way of converting their pension fund into an income.
   Enhanced annuities offer all the same benefits to customers as any other conventional annuity in terms of income guarantees and longevity insurance, but with higher levels of income.
   Providers will therefore continue to focus their efforts on increasing underwriting segmentation, streamlining processes and using technology to ensure that customers are able to obtain instantaneous quotations that maximise their income in retirement.
4. The perception of annuities will improve once we ensure that all customers receive the most appropriate annuity for them. This highlights the importance that all consumers who are eligible for enhanced annuities purchase them.
   In order for this to happen we must promote consumer awareness of the enhanced annuity proposition and the importance of being open and honest about their health.
   Providers, advisers, the FSA and the media all have a part to play here. For their part, the FSA can provide a greater emphasis of enhanced annuities in the literature, website and comparative tables.

It is up to the industry to provide products that factor in each person’s age and level of savings – and deliver investment control, income flexibility and value for money, writes David Burrows

Pamela Atherton gauges the reaction of industry figures to the new provision of the finance act which allows individuals to purchase money-back pension annuities

Millions are losing out on important retirement income by purchasing standard annuities instead of opting for health or lifestyle enhancement cover, reports Matt Trott

With more people living for longer than they expected, with-profits annuities are becoming more desirable as they offer the potential for income growth, reports Trevor Mitchell

Summer’s here and the time is right for many things – dancing in the street, even if you heed the words of Martha Reeves – but you can guarantee that it won’t be for thinking about finances.

James Hay Pension Trustees has admitted it is nervous about the prospects of clients putting certain types of residential properties into their Sipps post A-day.

iimia’s multi-manager team have controversially said that “boring is best” when it comes to maximising investors’ returns, in direct contrast with the current consensus among independent financial advisers that it will remain a stockpicker’s market.

Inheritance tax (IT) receipts have soared to nearly £3bn over the past year, an increase of 16.09% from the previous year.

iimia shareholders have voted to continue its New Zealand investment trust following an increase in its net asset value by almost a third in the last year.

Legal & General (L&G) has decided to move the administration of its self invested personal pension (Sipp) business in-house. The move takes effect from the start of June and will see the administration of their entire portfolio of Sipp business transfer from Capita PPML.

Barry Bolland, the recently elected chairman of the Sipp Provider Group (SPG), has joined stockbroker Charles Stanley’s pensions and benefits company, EBS Management, as technical manager for their SSAS and Sipp portfolios.

Punter Southall Financial Management (PSFM), the independent advisory firm and sister company to consulting actuaries Punter Southall & Co, has appointed Paul Johnston as its MD.

AXA has appointed Irvine Baxter as its new head of offshore sales as it seeks to expand its support to the independent financial adviser (IFA) market in the provision of offshore investment products.

The founders of multi-award winning needanadviser.com have established a new service company in Spain, Need An Adviser SL, dedicated to helping IFAs and their clients when they move to Spain or buy holiday homes in the sun.

Government moves to restrict borrowing by pension funds from next April could have an adverse impact on entrepreneurs and small to medium-sized enterprises (SMEs).

The Inland Revenue has been known to go to great lengths to make sure that it gets its share, but now it seems that the taxman is pursuing tax fiddlers beyond the grave.

The Sipp Provider Group and the Association of Pensioneer Trustees will have merged by the end of 2005. Pádraig Floyd asks the two organisations why, in this case, two heads are not better than one

High Net Worth talks to the Inland Revenue about tax and property in pensions

Advisers will have increasing opportunities to show clients what is right for them with regard to the changes delivered by A-day. The flipside of this, however, is the requirement for advisers to provide detailed guidance to clients in regard to the more technical aspects of pension planning, not least A-day changes, says Robert Hudson

Some still believe that offshore tax havens are shady places that are only in business to salt away drug and gun money. In truth, it can provide effective access to a vast selection of investment

What are your thoughts on the company that has released this product?

What are your thoughts on the company that has released this product?

What are your thoughts on the company that has released this product?

The change of rules surrounding the amount of money that investors will be able to borrow to buy property and the opportunity to put your own house into your pension, or invest in a holiday home overseas, is now something of a hot topic and has generated much debate, says Ruth Emery

The drastically changing investment climate of the last seven years has resulted in some soul searching in Tim Lewis’ independent financial adviser (IFA) practice and a more hands-on approach to investing his clients’ monies

Working with emerging wealthy families and individuals has taught Fiscal Engineers some valuable lessons that have ultimately forced it to re-shape its business, says Shane Mullins

Nick Cann delves into the key elements involved in making the transition to a fee-based financial planning business

The new pension simplification regime for senior executives will mean that all companies will need to review their top-up schemes. However, different assumptions and different alternatives will apply to different executives and selecting the most suitable option is a very individual issue, says Mark Stopard

Wealthy individuals and their advisers need to be aware of the implications of the new tax legislation in deciding whether to place assets into trust, remove assets from trust or restructure the terms of an existing trust in both the onshore and offshore arenas, says Gregory Laming

Killik & Co has appointed Alan Page to the new role of corporate services manager.

Suffolk Life has appointed Rollo Wilson in the newly created role of head of corporate sales.

Following the sales success of its range of managed investment solutions in the UK, Skandia Investment Management (SIML) has hired a new head of investment sales – offshore, in the shape of Mike Smith.

This month’s issue of Pensions Management has our annual survey of self-invested personal pensions (Sipps). In the past, Sipps could have been compared to a two-seater sports car of the pensions world – the kind of vehicle many aspire to, that offers the promise of high performance, but which also needs some specialist care and attention from time to time.

Following the general election, David Blunkett has now stepped back into the cabinet, this time as secretary of state for work and pensions, with Stephen Timms and Margaret Hodge appointed as ministers of state. 

Self-invested personal pension (Sipp) providers could find themselves liable for any health and safety breaches at residential properties after A-day, next April.

TUC general secretary Brendan Barber has called for a new pensions settlement and for ministers to resist employer groups who say they will not back compulsory pensions contributions. “Ministers should not let employer lobbyists hold them to ransom when they say that they will not back compulsion – especially when there is evidence of substantial employer support.”

The difference between the two is largely cosmetic, says Hywel Williams, as he makes a case for maintaining an adequate state scheme where the real choice for the majority should be the age and ‘speed’ of retirement

Pension transfer values could go up by as much as 50% for younger members of defined benefit (DB) schemes, under new actuarial proposals.

There has been considerable growth in the enhanced indexation market with funds closing, providers launching new products and more companies moving into the market.

The freedom to invest in residential property is going to be a real driver in the growth of the Sipp market. So knowing your stuff when it comes to property investment will be crucial. That’s where we can help.

PM editor-in-chief Matthew Craig displayed his masochistic tendencies in full recently, by taking part in this year’s London Marathon.

I was reading in the paper the other day about two Norwegian bank robbers who robbed a police ambulance boat. The article didn’t say just why they robbed an ambulance boat, but they obviously had their reasons. Anyway, after getting on board the boat and stealing the drugs or whatever it was they were after, they made their getaway in a rowing boat.

Legal & General (L&G) has taken the decision to move the administration of its self-invested personal pension (Sipp) business in-house.

The current UK pension system should be overhauled and the responsibility for running it handed to an independent body, according to a report published by financial services think-tank the Centre for the Study of Financial Innovation.

Most companies have now decided on a strategy for A-day, but are refusing to be rushed into making immediate decisions on amending their scheme rules – preferring to take their time to balance the needs of the business and the employee, according to a survey by Paymaster.

Abbey Wrap has added funds from Credit Suisse Asset Management (CSAM) and Jupiter, boosting the number of funds available on its menu to more than 730.

The Pensions Act 2004 introduces yet more acronyms into the pensions world. PPF (the Pension Protection Fund) and the TPR (the Pensions Regulator) to name but two.

Winterthur Life UK has launched a flexible Sipp with remote control access in anticipation of A-day rules.

Clerical Medical has developed a series of master classes as part of its intermediary support programme, Advice Matters.

You will already be aware of how the changes in the new legislation will affect the way you run your pension scheme. How will you get the message across to members?

Alexander Forbes Financial Services (AFFS) is launching a Sipp in conjunction with Standard Life and Investment Solutions that will have access to a full range of multi-manager, equity and alternative investment opportunities.

Skandia’s pension transfer analysis service now includes money purchase reports on top of the existing final salary transfers, a feature it claims will save advisers’ time.

As mentioned in the March edition of PM, one of the key aspects that came into effect on 6 April 2005 was the change to the limited price indexation (LPI) provisions. This is the statutory requirement to increase certain pensions once they come into payment.

The draft code of practice on defined benefit (DB) scheme funding lacks clarity and could mislead scheme members, according to criticisms levelled at it by actuaries.

I have travelled around the country a lot over the last few months, talking with independent financial advisers (IFAs) about pensions simplification – and it now feels as if the penny has finally dropped – and not before time.

The Pensions Management Scheme Awards have now opened for 2005.

The third annual Pensions Management Technology Awards for 2005 has now closed to entrants.

The time is also approaching for the seventh PM Admin & Service Awards.

The category for best investment strategy using specialist managers was introduced to the PM Awards to reflect the growing

This year’s PM Awards see the creation of a new category for the best small to medium-sized scheme, as defined by holding total schemes assets of not more than £500m.

The government has announced it will introduce legislation in October 2006 which will set a default retirement age of 65 and will also make discrimination on the grounds of age illegal. This means that setting minimum or maximum ages to do certain jobs, for example, will have to be objectively justified, says Hilary Salt

An actuary who genuinely wants to change the industry for the better, Trevor Matthews, chief executive of life and pensions at Standard Life, has that can do attitude that Englishmen know all too well, writes Pádraig Floyd

E-commerce is the future – everybody says so. But even though the technology is moving at wrap speed, the system will need a boot-up before technology suppliers can deliver the e-services that independent financial advisers are demanding. Luckily, working groups of all parties have started to interface, writes Rory Curran

In a time, not too distant, providers will create products to capitalise on the introduction of a range of investments, such as residential property and works of art, that will be available to keepers of the Sipp, reports Gregor Watt

A-day will signal the dawn of a new era as greater investment freedom and law changes will see millions more signing up to Sipps – from home owners to high flyers, writes John Moret

Pension providers are buying asset allocation tools so that IFAs take them seriously. Will Hadfield discovers how online tools that calculate the optimum mix of investments for each policyholder are becoming the core of pension companies’ services

As guardians of institutional investors in a number of corporations, trustees should ensure that the interests their shareholders are represented at AGMs, says Tim Sawyer

Phil Boyle looks at the inner workings of the RSPA and what it has achieved so far in its goal of raising the quality of administration service

In the first PM survey on enhanced indexation, five providers describe what is happening with the market and where it is headed. While some claim client demand has grown to such a degree that they have had to close some funds because they have hit capacity ceilings, other experts cast doubt on whether such high demand really exists – or if it’s just another market myth, reports Ruth Emery

This is an active asset management technique that aims to overweight stocks with potential and underweight poor ones – while exploiting a given equity market’s anomalies to add value, reports Alistair Sayer

Founded in 1934, Henderson is a leading independent investment manager, providing a wide range of investment products and services to institutional and individuals in Europe, Asia and North America. Henderson manages over £69.1bn (as at 31 December 2004) in assets and employs more than 800 people around the world with extensive client experience across corporates, governments, local authorities, charities and insurance companies.

Henderson has a clear focus on investment management and manufactures a broad range of actively managed investment products for institutional and retail investors across multiple asset classes including equities, fixed income, private equity and property.

David Trenner answers this month’s G60 questions on the government’s £20m-a-year Financial Assistance Scheme, posed by the following case study

Lesley Carline looks at answers provided by members of defined contribution schemes and analyses the results of the survey which covered investment choice, take-up and the success of strategies

Being a whinger, Titus Bower complained bitterly to Oscar Patterson about the cold in the ice hotel in Lapland and the additional obligations on trustees contained in the Pensions Act 2004, reports Neil Smith

After breaking the shackles of its previous boom and bust cycles, the European high yield bond market appears set for good performance, says Rod Davidson

It was not so long ago that annuities were referred to as simple products, so how come pension income advice, of which annuities are the major part, is now regarded as complex, asks Stuart Bayliss

Peter Quinton has scooped a top communications role at Alexander Forbes as public relations director.

Barnett Waddingham LLP has appointed three partners specialising in pensions and actuarial advice to group occupational pension scheme clients.

Insight Investment has appointed Stuart Eaton as a UK equity fund manager in its core UK equity team.

Watson Wyatt has boosted its UK investment consulting team by appointing Jenni Nicholls as a senior investment consultant.