The industry has welcomed the concessions made by the Pension Protection Fund (PPF) to extend the deadline for scheme valuations and to recognise special cash contributions.

The Association of British Insurers is implementing a two-phase overhaul of the reporting of investment fund past

Brendan Barber believes that everyone should be able to retire on a decent income and calls for a radical overhaul of pensions to help women

With the Pensions Commission report due at the end of this month, the government must not be afraid of making difficult decisions about compulsory pension savings, says one of its main proponents.

The long-awaited scheme funding regulations have been pushed back by two months causing alarm in the industry.

Staff turnover among investment professionals in the UK equity market has increased dramatically in the last 12 months, sparking fears of a brain drain as people move to other sectors.

While many press commentators have said that Ken Clarke should surely be collecting his pension by now rather than running for the Conservative leadership, the leadership candidates have wasted no time in blasting Labour’s pension policies as “disastrous”.

Hundreds of consultants and doctors will exceed their £1.5m lifetime pensions allowance and face high taxes, despite calls for changes to the NHS pension scheme.

The UK public equity market is failing to treat pension deficits as a debt of companies, signalling fears that consumers may be misled about investments.

The Association of Consulting Actuaries (ACA) has criticised the government’s decision to consider pension savings assessable for inheritance tax (IHT), saying that it both discourages pension saving and that it contradicts the good work done by pension tax simplification.

David Willetts MP has proposed that employers should be allowed to pay for contracted-out liabilities to be taken back into the state pension scheme, thereby removing a significant part of the pension promise from balance sheets.

Have you been keeping up to date with the Trustee Masterclass series produced as a joint initiative between PM’s sister title, Pensions Week, and Merrill Lynch Investment Managers (MLIM)?

Pensions Management’s editorial team has completed a hat-trick of awards for the standard of its journalism, with recognition for PM’s editor-in-chief, Matthew Craig, and staff writer, Gregor Watt.

Prudential has appointed Lloyd’s chief executive Nick Prettejohn to succeed Mark Wood as chief executive of UK insurance

Keen readers of PM will have noted the existence of our annual awards for excellence at pension schemes.

Risk profiling tools have become increasingly popular among the advisory community, but according to one industry expert, they are “useless” and their use is “usually misconceived”.

Alexander Forbes Financial Services has developed an online video presentation to add to their benefit communications offering.

Government proposals to

Winterthur has launched a ‘fast track to self-investment’ service as part of its personal pension so clients can easily switch post A-day.

Part of the Pensions Act 2004 is designed to implement the 2003 EU directive on occupational pension schemes. This directive was supposed to have been implemented by member states by 22 September 2005.

One of the UK’s largest Sipp administrators has announced that it will not allow ‘wasting assets’ within any of its Sipp products post A-day.

Assetz has become the first property investment specialist to launch a UK and overseas property-friendly Sipp.

With less than six months to go before A-day, there are two categories of members who require immediate attention – those due to retire after A-day and those who wish to

As A-day draws closer, the calendar is filling up with simplification seminars about investment opportunities and the legal complexities of the changes.

The Association of Pensioneer Trustees (APT) and the Sipp Provider Group (SPG) have merged to become one organisation to move into the post A-day world.

Currently, occupational pension schemes can restrict the payment of survivors' benefits to widows and widowers. However, if they pay survivors' benefits to unmarried opposite sex partners, they must do the same for same-sex partners. From 5 December 2005, they will also have to pay survivors’ benefits to ‘registered civil partners’. This is because, with effect from that date, same-sex couples will be able to register their relationship, giving them many of the rights and responsibilities associated with marriage.

Norwich Union has extended commission hikes to other products ahead of A-day next year, sparking fears of a commission war leading to churn at the cost of consumers.

Investment opportunities available post A-day could be a case of evolution rather than revolution, as research highlights more than 70% of consumers have no knowledge of the forthcoming changes.

As I write I make it about six months to go until A-day. So are we all ready?

Objections continue to be raised against the calculation of the risk-based levy, as the industry accuses the PPF of prioritising profits over fairness. Stephen Nichols asks whether the situation could be turned around to benefit the schemes and companies who will be most affected

IT and the back office system has a key role to play in the management of pensions post A-day, says Rory Curran

Gareth Isaac looks at the state of the global economy and wonders if the time is right for pension funds to invest in bonds

Matthew Craig, editor in chief, Pensions Management and Pensions Week: For self-invested personal pensions (Sipps) investors, does the panel feel that investment strategy has been properly addressed in the past?

David Trenner answers this month’s G60 questions on taking tax-free cash from a pension scheme and whether things will change post A-day, as posed by the questions below

Malcolm Rifkind, the new shadow secretary of state for work and pensions, sets out his vision of how the pensions system can be saved. He talks to Gregor Watt

Jason Shaw looks at three cases from the ombudsman’s 2004-05 report. Two involved incorrect benefit information and the other shows that an oral promise is just as binding as a paper one

Pádraig Floyd, executive editor, Pensions Management: Where do you think we are in terms of investment strategy, and the thinking behind those strategies since Myners? Has it had any particular success?

Stuart Baker takes a scheme through a Pension Protection Fund assessment period

The key to successful residential property investment will be a cool-headed review of an investor’s attitude to risk, time horizon and existing pension fund assets, says David Marlow

Ruth Emery asks some Sipp experts for their views on the different asset classes that will be available to investors after A-day

Matthew Craig, Editor-in-Chief, Pensions Management and Pensions Week: How far can companies take the concept of outsourcing?

Stuart Drew looks at the choice between India and China when it comes to offshore outsourcing

The UK markets have produced stronger returns than the majority of world equity markets so far this year and Mary Haly believes prospects remain positive for the future

In the first of a two-part article, Stuart Bayliss examines some of the timing pitfalls that are befalling open market option annuitants

Law firm Halliwells has continued the expansion of its pensions department with the hire of a specialist team from Pinsent Masons in Manchester.

The Annuity Bureau has a new head in the shape of Andrew Oliver following former owner and managing director Peter Quinton’s departure.

Epic Investment Consulting (EIC) has opened a second office in Glasgow, complementing its existing one in London, to offer a more efficient service to pension schemes in Scotland and North England.

Butterfield Private Bank has strengthened its investment management offering by recruiting three senior industry professionals for its asset management division.

The Association of Investment Trust Companies (AITC) has chosen Ian Sayers to fill the newly created position of deputy director general. Sayers joined the AITC in 1998 as technical director.

Trustees are now under greater scrutiny, given their responsibility in safeguarding pension scheme assets

Geof Pearson points the way to three publications that will help trustees do a better job

The overall impression is new legislation with limited ambitions, overtaken by events, and rendered ineffective in light of the bigger picture, says Andy Fleming

Andy Fleming outlines the roles both trustees and their consultants should play to optimise the investment outcome for a pension scheme

Richard Lockwood looks at some of the issues involved in the implementation of a successful and effective alternative investment programme

Jim Doran examines some of the core principles of governance that trustees can follow to help improve their effectiveness

A structured and rigorous approach to self-assessment will give trustees a clear picture of their performance, says Rodney Jagelman

Martin Freeman looks at some of the challenges trustees face and describes some of the solutions offered by technology providers

Frances Corbett examines the imminent publication of the pensions regulator’s code of practice on trustee training and assessment

The Raising Standards of Pensions Administration initiative has become firmly established in the pensions industry and key to making a real and positive difference for the average member, says John Reeve

From real-time valuations to modelling tools to company intranets, the advances in technology are being used to help scheme members understand more about their pensions. Pádraig Floyd reports

When you step back and look at the bigger picture, it is absolutely crazy that employers are finding it increasingly hard to operate good occupational pension schemes, as the need for such schemes grows with an ageing population and a greater need for retirement provision.

Despite being a small scheme, the judges awarded BUPA this award because of its excellent communication of the benefits of salary sacrifice to members and its highly successful investment strategy

The winner has to be an individual who has demonstrated imagination, vision and leadership for the benefit of the broader pensions industry and for having ‘gone the extra mile’ in the service of his or her members

The judges were unanimous in their decision to nominate Norgrove for this award in recognition of the impressive manner in which he has steered the launch of this pioneering organisation against a background of considerable hostility and mistrust

The result of the combination of in-house management, external management and the use of specialist managers to add value has been to produce good investment results at a low cost

Administration was seen as a strong point for the scheme; it has seven-day contribution deadlines for all its member schemes and has also brought in payroll automation

The scheme was serving its members by covering all the bases and not focusing on one or two areas to the detriment of others

BUPA created an interactive presentation on CD-Rom, as well as on the scheme website and in paper format to show how salary sacrifice works. Because the presentation was user-friendly the take-up rate was 99%

The BUPA Pension Plan was seen as a clear winner by the judges for the way it had tackled investment strategy issues – the scheme had devised a clear structure to deal with investment risk and asset allocation

Nationwide’s written material was described as “easy to read, informative, eye-catching, clean and uncluttered. It gets the message across really well.”

The key to winning this award is to demonstrate that the communication material provided is easy to use and easy to understand by all sections of the membership, irrespective of their existing pensions knowledge

The trustees provided a clear description of their strategy, how they were going to implement it and the results of the new strategy

A common expectation is that ‘biggest is best’, but all too often we are disappointed. However, in the pension scheme arena, the biggest is undoubtedly the BT pension fund, which in this case proved the rule to be correct

We offer our congratulations to the winners and sincere thanks to all entrants for their efforts. PM would also like to thank our generous sponsors for making these awards possible.

Scheme of the year

• 1995 Sheila Gleig, TSB Group
• 1996 Alan Herbert, BP
• 1997 Ray Martin, Zeneca
• 1998 Michael Duncombe, The Post Office
• 1999 Jenny Rosser, BA Pensions
• 2000 Mike Woodall, West Midlands
• 2001 Ralph Turner, Emap Flexiplan
• 2002 Graham Brown, Barnados
• 2003 Phil Goodwin, LPFA
• 2004 Alan Murphy, Co-op Group
• 2005 Mike Dobson, London Borough of Lewisham

It was Robert Burns who once said: “There is no such uncertainty as a sure thing.”

1. 2005 has seen a resurgence of with-profit annuities so growth in the popularity of investment linked annuities is already here. This is not just because memories of the 2000 to 2002 stockmarket down turn are fading. Retirement is now a 20-year investment opportunity and fixed interest investment over such a long period must be questionable, especially when over 20 years even modest inflation will seriously erode the purchasing power of a level annuity. For retirees in the ‘low to medium’ investment risk category, with-profits annuities offer income growth potential and a hedge against inflation. For those with a greater appetite for risk, the new flexible lifetime annuities offer income and investment choice and control.
2. Spreading risk in retirement makes sense and splitting the purchase money between guaranteed and investment-linked annuities may achieve the goal, although this could incur additional cost. Another approach is to match the starting income of a with-profits annuity to the level income available from the equivalent guaranteed annuity. At present an anticipated bonus of around 3% a year is required to do this. So if future bonuses exceed 3% increases in income can be expected from the with-profits annuity. Predictions of long-term bonuses from a strong with-profits fund in the region of 6%, combined with the downside protection offered by minimum income guarantees, make this alternative well worth consideration.
3. Conventional annuities will remain the favourite retirement income vehicle for the vast majority.
   A-day will see the advent of ‘value protection’ bringing the additional option of a ‘live or die’ money-back guarantee to annuitants by providing a taxable lump sum on death. This will revolutionise the public perception of annuities and remove the primary objection to annuitisation – ‘I will lose my money if I die soon after I retire’.
   For those who can afford to defer annuity purchase until age 75, ASP may not prove to be as attractive as at first thought. Schemes to transfer funds to family members will need to take ‘benefit crystallisation events’, potential IHT liability and delay due to surviving spouses into account.
4. With the need for lifelong income growing as average longevity increases, the annuity market is set for long-term growth. The availability of an annuity ‘money-back guarantee’ will encourage pension savings by underpinning annuities as offering good value regardless of the length of an individual’s retirement. Sources of finance to provide retirement income will inevitably diversify and more efficient ways of converting illiquid personal wealth into accessible income will be a growth area. For example, the huge wealth accumulated in the form of domestic property will lead to the development of more efficient packages combining lifetime mortgages and annuity income.

1. I expect with-profits annuity (WPA) sales to increase as the basic customer proposition becomes more relevant. The problem facing many pensioners is that they want a higher standard of living during a longer period of retirement. Level annuities do not protect against inflation and RPI annuities are expensive. WPA can offer an income that starts somewhere between the two and providing future bonuses are sufficiently high thee will be a rising income. However, WPAs are more risky so more advice is necessary.
2. I think that it is very important to have a mix of annuities. I tell my clients that they should hedge against a number of different risks. The risk of living too long or dying too early, inflation risk, investment risk and the risk that personal circumstances will change. No one annuity will hedge against all of these risks, but a combination of annuities will provide a better hedge.
   The exact combination will depend on personal circumstances.
3. I think it is helpful to consider three types of clients. Small beer (no disrespects but that’s what some clients call themselves), middle Britain and fat cats (take all the cream). Simplification will not really impact on those with smaller funds and middle Britain will still struggle with choice between annuities and drawdown but annuities should remain the preferred option for many. It is the fat cats who have most to gain and I do think that they will delay buying annuities in favour of ASP. That is until they realise that should really be buying annuities.
4. Innovation and annuities don’t normally go together and the big disappointment with simplification has been the lack of scope for innovation because value protection and limited period annuities are non-starters. But all is not lost. The innovation will not be in annuities themselves, but in the advice surrounding annuity purchase. For instance, it might be good advice to takeout pension term assurance instead of value protection. Also the combination of annuities will be easier especially for those in company schemes where HMRC limits will disappear.

1. Annuitants generally look to maximise their income in retirement, and the lure of additional income will tempt many into considering an investment-linked annuity.
   As confidence in the stock market has improved, more annuitants have become prepared to accept the risk associated with equity investment, and we have already begun to see a corresponding increase in investment linked annuity purchase. However, this risk should be considered very carefully, as most annuitants will be unable or unwilling to accept this risk with their retirement funds. For these people a conventional annuity, and in particular enhanced annuities, will continue to be the most appropriate choice.
2. A conventional annuity provides a virtually risk free income for the rest of the annuitant’s life. However, due to the guaranteed nature of an annuity, greater returns may be available from an investment linked annuity or drawdown policy.
   However, this depends on whether the customer is willing to accept the additional risk associated with equity investment. In these circumstances it is important to ensure that their base needs are covered, and this is often best achieved via an conventional annuity. Once these needs have been satisfied, it may well be appropriate to take out a second annuity policy or drawdown plan to help provide additional income.
3. Conventional annuities provide a cost efficient means of converting a pension fund into an income stream with very little risk and built in longevity insurance. They provide a cost efficient solution to many customers’ needs at retirement, and will continue to be the most appropriate means of converting a pension fund into an income stream for many people.
   Unsecured pensions allow two alternative customer needs to be fulfilled, namely those of investment control, and the ability to pass the funds on to a beneficiary after their death. If these features are important to customers and the policies are deemed to provide them with value for money, they will continue to be popular with investors.
4. The success of any new product will be determined by whether it meets customers’ needs and it provides them with value for money. Therefore, even after A-day, I believe that the conventional annuity will continue to be the most appropriate retirement income vehicle for most people.
   One innovation that I believe will provide a key additional benefit for customers, whilst retaining the simple nature of the annuity, is to combine an annuity with protection against the future costs of long term care. Under this, annuity payments would continue to payable at their normal rate, but would then increase to cover the costs of long term care in the event of this being needed.

1. We would expect to see some growth in the market but there is a high likelihood that the attractions of income drawdown/USP and the new ASP, whether real or apparent are likely to eclipse interest in unit-linked annuities in the majority of cases.
2. This is interesting and pre-supposes that people have sufficient funds to be able to support this degree of flexibility. Most do not and, of those that do, we would have to ask if they would prefer the flexibility of income drawdown/unsecured pension (USP) over the mortality benefits of a unit-linked annuity. There is still some benefit to be had from providing a basic level of guaranteed income from a conventional annuity, especially given new information on increasing life expectancy but beyond this, tax or estate planning considerations may well favour USP.
3. USP and alternatively secured pension (ASP) introduce some welcome new flexibility into the market but they do not remove the old dangers namely, investment risk and the need to provide secure income for increasing life expectancy.
   Those with sufficiently large funds will reap considerable benefit from the unsecured rules and those with smaller funds, who still need to be wary of the risk, will reap the benefit of security and some extra flexibility from annuities. We expect to see the annuity market continue to grow strongly with increasing emphasis on maximising income from retirement funds through use of the open market option.
4. This issue is exercising many bright minds and for some categories, the possibility of mixing greater flexibility with some of the mortality benefit of annuities will be welcome, albeit at the expense of greater complexity. For many, simple additions such as value protection will enhance the attraction of conventional annuities which, however un-exciting they may be, have the valuable advantages of simplicity and security which will not be diminished by the new regime. Perhaps of greater importance will be increased use of the open market option and smoother transfer processes facilitating faster and less frustrating implementation of annuities at retirement.

The key to understanding the types of annuities available today is to choose a product that fits best with each individual, and with the choice on offer, there’s something for everyone. Gregor Watt reports

It makes sense to make maximum use of all available assets and to consider them as part of a broad portfolio, as many people will struggle with maintaining their pre-retirement lifestyle, says Nigel Barlow

Extreme caution should be shown before advising customers to put off purchasing an annuity and customers should shop around to ensure they get the best rates possible and the best advice, says Matt Trott

When you combine a guaranteed income with a recognised long-term investment like with-profits, there is a compelling case for considering with-profits annuities, says Trevor Mitchell