While Blunkett’s successor as work and pensions secretary gets used to life in the pensions spotlight, Ralph Jackson looks ahead to see what lies in store for John Hutton in the next few months

Legal & General has teamed up with the Department for Work and Pensions (DWP) to pilot a scheme aimed at increasing

John Hutton has stepped in as work and pensions secretary following David Blunkett’s resignation from the cabinet role.

Standard Life, which launches its wrap service early in 2006 (PM, October 2005), is thought to be close to agreeing the licence for the technology that underpins the new system.

A Department for Work and Pensions (DWP) report has revealed huge inequalities of income in retirement between men and women.

The Government Actuary’s Department (GAD) factors which will determine limits for unsecured and alternatively secured pension incomes post A-day have been issued for consultation.

A consultation document describing how the Pensions Regulator plans to regulate funding requirements for defined benefit schemes has been met with a mixed response from the industry.

Reading an actuarial report the other day I found out that I’ve been temporarily immortal since some time in 2003. What’s happened is that men around the age of 50 have had a two-year increase in life expectancy since then. I mean, how good’s that? It’s two free years isn’t it? A bit of a bonus.

A major pensions fraud case has ended with five people jailed for a total of 26 years, following the theft of £3m in pension assets.

The A-day requirement for electronic reporting for all pension schemes has been delayed by at least six months due to computer systems not being ready.

Aidan Vaughan writes with a question regarding forced retirement and a final salary guarantee and two industry specialists reply with their thoughts and guidance

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)?

With less than 150 days to go until people can purchase buy-to-lets with their pension, industry experts are warning that this type of investment may not be so suitable for a retirement fund.

Self-invested personal pensions (Sipps) are set to become a mainstream product after A-day, according to research

The 2003 EU directive ‘on the activities and supervision of institutions for occupational retirement provision’ requires occupational pension schemes to have adequate internal control mechanisms. Recently, the DWP, while adopting “a proportionate approach”, issued draft regulations to implement the directive.

Self-invested personal pensions (Sipps) are likely to make property hotspots even hotter, but will have a minimal impact on the majority of the market, says a report by the Royal Institution of Chartered Surveyors (RICS).

With less than six months to go until A-day, companies have bucked up their ideas and are ready for pension changes.

The Pensions Act 2004 is set to have a significant impact – not just on the way that schemes are funded, but also on the way trustees and companies communicate with members.

Annuities could still be the best way to pass on wealth to beneficiaries with fewer inheritance tax (IHT) implications after A-day, by using a ‘little known’ allowance.

Retirement planning was the UK consumer’s number one financial advice need in September, according to a report by

Perhaps not rivalling gifts from the wise men, but three facts about the new pensions tax regime that should help to dispel some commonly held mis-conceptions.

Customer queries regarding pensions simplification could cost the industry more than £93m.

When I was asked to write this series of articles, I had not realised how quickly time would fly. As soon as I have written one month’s copy, it is time to write the next!

With three-quarters of policyholders in England and Wales stating they would leave their provider if they suffered from poor customer service, drastic improvements in communicating information to the end consumer may be necessary, says Chris Jackson

Linda McBain reviews the rates, terms and conditions for cash held in Sipp bank accounts, the need for them to be more transparent and how they can play a key role in differentiating a proposition in an increasingly competitive marketplace

The awards lunch for this year’s Pensions Management awards for excellence at occupational pension schemes was, judging by

comments PM has received since, greatly enjoyed by many people.

In the words of one scheme: “It is consistently the best awards ceremony we attend.”

For the winners, the awards lunch and the presentation of a trophy makes for a memorable day out. Not only that, but many schemes say that their successes have been invaluable in highlighting the hard work done by scheme staff. And other stakeholders linked to a scheme, such as sponsoring company directors and employees, as well as scheme members, see an award as a welcome seal of approval for schemes.

These photographs from the day itself should give you an idea of the event if you were unable to make it. Starting with a glass of two of bubbly, guests are able to mingle and catch up with friends and contacts, before a hearty lunch and the presentation of the awards.

This year, renowned business journalist Jeff Randall handled the awards as host in his own inimitable style. As well as the scheme winners, prizes were handed out on the day for a business card draw and the PM awards’ unique ‘name that tune’ competition.

We asked the recipients of this year’s awards to tell us how they and their scheme staff felt about winning, what they believed the reasons were behind their success, and whether they thought anyone should be singled out to receive special thanks.

A fact-finding mission by Australian senator and compulsory pensions stalwart, Nick Sherry, provided Pensions Management with the perfect opportunity to discuss how UK plc drags the pensions issue out of the mire

Compulsion is a hot topic, and though many would recommend that the UK follows the same path as other countries to encourage people to save, what works for some may not be the answer here, says Mike Morrison

On a mission to discover what it means to be a trustee during difficult times, Ruth Emery attends a beginner’s training course in search of some answers

Pension schemes must wake up to the potential pitfalls of breaching conflict of interest between company ownership and a place on its scheme’s board of trustees, says Mark Baker

A-day should herald the arrival of a new, plain and unambiguous world of pension regulations, but the changes will affect us all in very different ways, says Deborah Wilson

Communication is the element that will make the difference between a site that delivers information on employee rewards and one that influences behaviour, says Rob Hussey

Achieving a successful ratio of risk and liabilities has always been a delicate balancing act for a fund portfolio, however, the key is using fixed income as a basis for liability-driven investment, says Paul Craven

In the second part of his article, Stuart Bayliss continues to examine the problems of timing affecting open market option clients, and asks whether a solution is possible

The Railway Pensions Trustee Company has promoted Michael Goy to deputy chief executive as part of a restructuring of its investment and administration.

The Institute of Actuaries has appointed Watson Wyatt’s Nick Dumbreck as its next president.

Capita Hartshead has appointed Jardine Lloyd Thompson’s John Broker as business development manager focusing on third-party pension administration in the private sector.

Trustees are now under greater scrutiny, given their responsibility in safeguarding pension scheme assets and we hope that trustees will find this guide goes some way to relieving the pain

Pension schemes are rapidly coming to understand that focusing on the asset liability equation is mission critical, says Sean Glasgow

Pension trustees need a Better understanding of asset allocation to meet their new responsibilities. David Allen discusses strategy, tactics and dynamics

Pensions schemes are realising that tapping the expertise of the multi-manager approach can bring significant benefits to a scheme, says Gregor Watt

From next january, UK investment managers will have to reveal to their customers how dealing commission is spent. Pamela Atherton looks at the impact

Once considered on the radical fringe of the institutional investing world, portable alpha is an increasingly credible solution, says Ceri Jones

Pension funds should forget the past and use their current tools to develop a better future, says Mark Breedon

Pension fund trustees are coming round to the belief that quant managers are able to offer a scientific approach to stock picking, says Pamela Atherton

As solvency problems hit pension funds they should adopt some of the asset choices of the more enlightened insurance companies, says Pamela Atherton

Swaps have become the dominant positoning and hedging vehicles in today’s euro fixed income mixed markets. Ceri Jones goes back to basics to explain all

Collateralised debt obligations are a fast-growng area of the currently fashionable fixed income products. Ceri Jones examines the phenomenon

As hedge funds have become demystified in the eyes of pension funds, so they are assuming a greater allocation of funds, says John Godden

Pension funds have long invested in private equity and the business is now becoming increasingly common in the uk, says Matthew Craig

Commodity investing has become increasingly attractive for pension funds as they widen their investment horizons, says Matthew Craig

Ruth Emery looks at why an increasing number of funds are engaging in socially responsible investment as part of their mainstream strategy

Despite being illiquid, strong performance and low correlation to both equities and bonds makes property an ideal investment, says James Wallace

As Indirect property investment gains momentum the government is holding fire on approving real estate investment trusts, says James Wallace

Absolute return: an increase in value or how much money was made from the investment

Accounting Standards Board
www.asb.org.uk

R ight now, Christmas is probably the last thing on your mind. Other issues will be forcing out thoughts of institutionalised, mandatory pleasure seeking – the days you will waste in front of the gogglebox following festive excesses the Romans could not have imagined. There is the tightrope you walk over the viper pit that is the bosom of your family, praying – the only time you will throughout Yuletide – that the kids don’t get so mithered they set off a China syndrome in the dining room.

Residential property investment in self-invested personal pensions (Sipps) has been hogging all the headlines surrounding the changes to investment rules due in April, but now many experts are warning against the over-reliance of property as a pension investment.

Paragon Mortgages and Mortgage Trust is gearing up to take advantage of the availability of residential property for pension investment from April next year by launching a tailor-made mortgage solution for Sipp buy-to-let investors.

M&G Investments has launched a property fund for the retail investment market.

Legal & General has launched two structured products, the Accelerated Growth Investment Plan 5 and the Protected Capital and Growth Plan 7.

The prospectus for the Framlington AIM venture capital trust (VCT) 2 has already been released and the initial closing date for applications has been set as the end of December.

Independent financial advisers can now apply for the title of chartered financial planner (CFP) to demonstrate they have reached the very top of their profession.

The merger of the Sipp Provider Group (SPG) and the Association of Pensioneer Trustees (APT) has finally been approved with both bodies officially voting to confirm the decision to become the Association of Member-directed Pension Schemes (AMPS).

High net worth individuals may be better off investing their money in an annuity rather than the much- heralded alternatively secured pension (ASP) after A-day because of the impact of inheritance tax (IHT) on the new retirement tool.

Independent financial advisers need to check that any of their clients planning to take enhanced protection from A-day have stopped all existing pension arrangements, including old retirement annuity contracts and executive pension plans (EPPs).

The pensions industry faces a serious problem with confusion over A-day regulations and their interpretation, according to the chairman of the Association of Member-directed Pension Schemes (AMPS), John Bradley.

Friends Provident (FP) has turned its back on small self-administered schemes (SSAS), and will not take on any new business from the end of this year.

1. There are several opportunities when annuitisation should be considered by HNWIs. The first is for all those who are risk adverse and who would sleep more easily if they had a regular guaranteed income for the rest of theirs and their partner’s lives. Another, even for the risk takers, is for part of the pension fund at retirement, when it might be desirable to guarantee the absolute minimum income required and in doing so allow a more aggressive investment stance on the remaining funds. The third is when the capital required to provide the necessary income stream can be secured more effectively through the purchase of an impaired life annuity if appropriate, either at retirement, or when health might have deteriorated around age 75, thus leaving a bigger pot behind.
2. Individuals who are against annuity purchase are likely to continue to avoid it for long as possible.
   It is also quite likely that doing so will allow them greater flexibility in future years as legislation continues to change. It should still be possible to pass money down through generations via a Sipp even though a tax charge may apply. The alternative scenario is to take the maximum income out as soon as possible to spend or reinvest as desired, while restructuring their other assets for their beneficiaries.
3. ASP will allow longer investment planning for drawdown clients who do not want to purchase annuities. There is no set point when the funds have to be available to purchase an annuity. As A-day approaches it is essential that the right protection – enhanced, primary, or both are applied for. As the range of income limits is dramatically increasing, a tax-efficient income planning exercise should be undertaken to determine the appropriate income withdrawals post A-day.
4. If each client’s risk profile, health and objectives are taken into account during the financial planning exercise, I do not really see a need to differentiate between the sexes. It is more likely that a sophisticated investor’s partner might not want to take the same risks that they did should their partner predecease them, whether male or female. The surviving partner might well have a completely different view and, for example, prefer a fully guaranteed income instead of an insecure one. As a consequence, at all stages of retirement planning and particularly at reviews, the partner’s considerations and preferably their involvement, should be engaged.

1. Despite the flexibility to take an alternatively secured pension (ASP) from the age of 75, HM Revenue & Customs (HMRC) argues that members taking an income by this route instead of purchasing an annuity, will be treated as making a taxable transfer for inheritance tax (IHT) purposes. Even where a person has not started to draw an unsecured income, it will have to be shown that the reason to defer was purely to build up a larger fund to purchase an annuity, rather than to avoid IHT. These changes obviously highlight the need to revise projected planning. Those who dislike annuities, may prefer the Open Annuity if they are over 50 and have at least £250,000 in their pension pot. It is unlikely to be available after A-day. While the income is not guaranteed, it returns a profit on death to the estate.
2. The proposed basis of applying IHT to pension fund transfers passed to other family members works on the principle that an individual is deliberately depriving their estate of value (the income), by failing to buy an annuity. One aspect of these proposals is that an IHT transfer is deemed to have taken place even where a spouse inherits the fund. Given that men and women have often jointly funded their retirement through one partner’s pension, this seems unfair. It is a reasonable conclusion that this treatment would nullify the tax benefit of sheltering part of your estate within a pension fund, so that HNWIs may more readily opt for annuitisation.
3. HMRC had planned to apply a second test against the lifetime allowance for anyone moving from an unsecured pension to an ASP, but while in the recent report this has been ignored, it could still apply. Clients wishing to take income withdrawal from a large pension fund may be better off doing so before A-day to avoid the potential additional tax charge. An unsecured pension can pay up to 120% of the single life level annuity; the ASP can only pay up to 70%.
   Advisers therefore need to review clients who are also fully in income withdrawal or phased retirement to assess the need for additional means of income.
4. Recent reports still paint a stark picture of the various ways in which women are still financially disadvantaged, purely because of their gender. There is little evidence to suggest that investors are more attuned to making separate provision for the fairer sex in their portfolios. Women need to start saving earlier, make allowances for when they don’t work, and view their retirement planning as seriously as their male counterparts. The portfolio for HNWIs should take this into account. Undertaking cash flow projections with a financial planner, for both parties is essential.

1. Annuitisation is one the most important aspects of retirement planning. To explain why it is helpful to see retirement planning as effectively managing a number of risks. There is the risk of dying soon after retirement and the risk of living too long. Other risks include inflation, investment risk, and the risk that annuity rates may fall even lower. No one financial product can effectively hedge against all of these risks, but annuitisation insures someone against outliving their assets. I advocate a process called balanced retirement whereby clients have a combination of annuities and drawdown, and this combination changes over time to reflect changing income needs and risk profile.
2. There are a lot of people who want to leave their pension fund to their children, so ASP has obvious attractions. However, the sting in the tail will be a possible IHT charge on money left to family Sipps. One of the jobs of a good adviser is to help their clients to manage the two opposing forces of maximising income and maximising death benefits. Anyone who thinks they can do both is fooling themselves, and therefore a prudent investor should be encouraged to manage their pension to maximise their income and their personal assets to maximise the estate planning opportunities.
   The potential of IHT on ASP death benefit transfer is another reason why annuities should be bought sooner rather than later.
3. Many people simply do not like the idea of buying annuities, and many advisers think the same way because they have a vested interest in promoting drawdown. I think that ASP will certainly encourage people to defer annuity purchase indefinitely, or at least until an older age. My view is that people will quickly realise that they should be buying annuities in later life because of the high risks of drawdown, and I expect to see more use of phased annuities.
4. My experience is that women are taking an increased interest in pensions, not just in terms of investing their pensions but in terms of the advice they are seeking. There are a number of areas where this is more prevalent, including women who are running their own business or have reached senior positions in the professions; those who have a divorce settlement; and those managing the pension funds of their late husbands. Each client has particular problems, but one common problem is that an increasing number of women are concerned that their husband’s pension will not be large enough to provide them with the financial security that they want.

The review made by HM Customs & Revenue regarding funds and

annuities may change how HNWIs view annuitisation in their pension planning

Ethical investment has long been considered the black sheep of the investment family. However, times have changed and there may be good reason to bring it back into the fold

REVIEWER: Chris Wicks
associate director, alexander beard group

REVIEWER: Justine Fearns
research manager, awd Chase de vere

REVIEWER: Roddy Kohn
managing director, Kohn Cooper

A Sipp that could provide you with a holiday home seems like a dream come true, but like any investment it requires research and careful consideration, says Ruth Emery

Watching the pennies so the pounds take care of themselves never rang truer. Pádraig Floyd explains how Sipp clients – and their advisers may be letting money slip through their fingers by not keeping an eye on the interest rates paid on Sipp cash balances

The current investment vogue seems to be for absolute funds which – unconstrained by benchmarks – are free to generate greater returns for investors, says Alan Easter

In today’s world of multinational companies and global corporations the Global Investment Performance Standards are helping to level the playing field, says Michael Walsh

Liability-driven investment is widely acknowledged by pension funds as a necessity. However, high net worth investors are only just realising that they need to be following the same approach, says Shane Mullins

Barclays has undergone a number of senior management changes in its businesses, including appointing a new chief executive of the wealth management division in the shape of Thomas Kalaris.

Pointon York Sipp Solutions has boosted its technical support team with the appointment of HM Revenue & Customs’ Michael Smith as technical manager.

Fund management business Midas Capital has appointed John Alexander as development manager to support its growing range of distribution links.