The industry has praised the Pension Protection Fund (PPF) for listening to its concerns when setting out the risk-based levy proposals, but has warned that the levy is still in need of further fine-tuning.

The size of rebates for people contracted out of the state second pension (S2P) are now too low to offer a decent alternative through a private pension and Prudential is writing to all its customers advising them to contract back in.

Pensions Management’s annual Provider Awards reward excellent service provision by the advisers of UK pension schemes.

Following on from the Pensions Commission’s report, John Hutton comments on the proposals laid out by Lord Turner and discusses how he believes the government should begin to tackle pension reform in the UK

The proposals in the Turner report, coupled with the simplification changes on A-day in April, could cause a huge pension administration headache, according to Liberata Financial Services.

Alison Duffin responds to Matthew Craig’s ‘Spoiling the simplification tango’ article in PM December 2005

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)?

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.

The last-minute U-turn prohibiting tax advantages on residential property within pensions has spilt the industry, with some experts warning that it could hugely damage the trust between the industry and HM Revenue & Customs (HMRC), and cost companies thousands of pounds.

As from 6 April 2006, individuals will be able to take the whole of their pension funds as a cash sum, as long as those funds are ‘trivial’. To be trivial, the value of their funds under all schemes (including any pensions already in payment) must not be more than 1% of the standard lifetime allowance, that is to say £15,000 (for the tax year 2006/2007).

Following Gordon Brown’s last minute U-turn to prevent direct residential property investments in member-directed pensions, the Association of Member-directed Pension Schemes (AMPS) is calling for the borrowing restrictions imposed on property purchases to be removed.

If there was ever a misnomer then it was applying ‘simplification’ to the proposed new pension regime. We were promised eight regimes into one and that it would be easier to understand. We were also promised one wider regime of investments that would make pensions attractive to a wider range of investors.

The perpetual revolution of pension policy making looks set to continue this year, with the government’s response to the Pensions Commission due in the spring.

In 2006 the government will respond to the Pensions Commission proposals and consult on its own reforms alongside Turner’s. The prime minister seems to want to implement reforms quickly, but the chancellor merely wants to keep debating the issue. 

The Society of Pension Consultants’ (SPC’s) prime concern is that the attempt to provide for the 8.3 million people without any pension savings, will result in existing voluntary occupational provision being undermined. The SPC would like to see new incentives to revitalise occupational provision, or at least existing disincentives removed.

I would be very surprised if the government accepts the National Pension Savings Scheme recommendation as it stands, and I hope that the private sector will be allowed to take up the challenge and the opportunity to make pensions work at a cost not dissimilar to 0.3%.

We seem to have been debating pensions for years. Each new secretary of state has called for debate to lead to consensus, but 2006 will be the year the talk has to stop and policy has to be proposed. 

‘Son of Stakeholder’ rears its head. We’ve heard this before – a simplified pension scheme for all employees with a focus on cost (0.3% rather than 1%) and default funds.

As the eighties soft rock combo Europe once sang, it’s the final countdown, at least it is as far as preparing for A-day is concerned.

“Brown sinks Sipps” was one of the headlines last week. Having been involved with self-invested personal pensions (Sipps) for over 15 years it’s not the first time the death of this pensions wrapper has been predicted. Of course it is nonsense. With the market now estimated at around 150,000, total assets of circa £25bn and consistent annual growth at around 20% a year, the absence of residential property and exotica from the post A-day investment mix is most unlikely to kill off this market.

Individuals who are considering enhanced protection are expecting their employer to provide an alternative benefit to future pension accrual. The majority of leading companies are providing an alternative.

Self-invested personal pensions (Sipp) providers had been looking for a level playing field, given the move to ‘one registered pension scheme environment’ from April 2006.

Pensions simplication is the final piece in the jigsaw that makes the workplace the best place to secure financial independence.

While 2005 was a transition year, 2006 will show the real impact of the 2004 Pensions Act. Both the regulator and the Pension Protection Fund say they are seeking to take a pragmatic stance, but they have to enforce the law.

Marconi’s decision to put its pension scheme up for sale is particularly interesting for two reasons.

Pension managers (implementing the regulations) will be the ones with all the work in 2006. We will also continue to work with government and the regulatory bodies to ensure that the regulations

Our messages for companies running defined benefit plans are:

The year 2006 is not likely to provide any substantial relief for employers who carry the financial burden for final salary schemes, or trustees who have an increasing responsibility to ensure the scheme’s funding objectives are met, the employer is financially sound and the employer’s covenant is strong.

With all the fuss being made over state pensions and Turner’s report, much of the media coverage of pensions has been deflected from what for many people is their primary concern, running occupational pensions schemes.

The outlook for UK gilts is a bit uninspiring. There is a chance that the market may be undervalued if there is a cut in interest rates early in 2006. At the longer end of the market there is very little value as pension funds continue to buy for risk reasons, regardless of price.

Although the details for real estate investment trusts (REITs) remain sketchy, it does at last look like they will be introduced, and once the detail is sorted out, they will be rolled out very quickly.

The year should see further strengthening of prices for base metals due to the continuing supply/demand imbalance. Strong demand from Asia, particularly China, will continue, but a lack of investment in production from suppliers has meant that supply has failed to keep up and this will continue to be the case.

The increase in demand for inflation-linked swaps will continue as pension funds seek more flexible types of investment that can alter the nature of the risks they face, enhance fund performance, and provide a better match with liabilities.

Europeans equities are coming off the back of a good year and the prospects for next year seem equally sound. Expected growth should be in the region of seven, eight or nine per cent and this is due to attractive current valuations. Despite good growth last year, the value of European equities are below average on a global basis, particularly against US equities, and this alone makes them attractive for 2006.

The current good value of Japanese equities is down to structural factors rather than a cyclical process. Following a decade of poor performance of the Japanese economy, the costly restructuring process is starting to pay off for many firms. Increased cash flows have started a circle of virtuousness with companies able to spend cash, not only on share buy backs, but also on expansion and capital expenditure. This creates more employment which fuels demand and creates further increase in cash flow for these companies.

It is not very often that anyone feels sorry for lawyers, but looking at the avalanche of regulations they are having to deal with, both now and those due over the next 12 months, it is possible in an unguarded moment to feel a touch of

The Pensions Act 2004 continues to have an effect on corporate restructuring as it is making corporations do things differently to what they would normally do.

Senior executives will be particularly affected by the changes brought in from April, as they are most likely to be hit by the upper limit of the lifetime allowance (LTA).

It will be interesting to see the further development of the operation of the powers of the Pensions Regulator.

Amendments to pension schemes have never been straightforward, requiring either an actuarial certificate or member consent for any changes that may affect accrued rights, but the process is about to get much more complicated.

Scheme-specific funding requirements will take priority for many trustees this year.

Technology is nothing new in the pensions arena anymore and admin is as old as the hills, but there is one thing they have in common – this industry has found it very difficult to execute either of them competently.

Outsourcing administration is almost the norm now, with in-house teams tending to be the largest schemes. Simplification projects will dominate the early part of the year and administration resource is expected to be scarce as people realise that they will not be able to cope without extra pairs of hands.

Despite the large investments and accrued losses, the evidence of platform success is building. Funds under administration growth on platforms is running at about 60% a year, they continue to make life easier for advisers and they are closing in on their breakeven points.

There will be more focus on members in the future, as until now, the industry has been set up to work as business-to-business, but increased responsibility from simplification means that members are requesting more information on behalf of themselves or in some cases, their independent financial advisers (IFAs).

The new pension regime from April 2006 will require technology to drive the advice process more efficiently. Financial modelling tools will be vital to ensure clients understand their pension position before and after A-day.

Nick Sherry succeeded in overcoming the obstacles to achieve a long-term compulsion model for Australian pensions, something the government here could learn a great deal from. He talks to Pádraig Floyd about his experiences in the southern hemisphere and offers his thoughts on the way forward for UK reform

The government’s decision at the 11th hour to pull the plug on new investment opportunities under simplification has done considerable damage, says John Bradley

While liability-driven investing is now seen as a fixture of most portfolios, along comes inflation protection as another issue fund managers have to seriously consider. Craig Hurt reports

Purchasing property as part of a Sipp raises many points for consideration, none more complex than that of VAT registration. Julie Bavin navigates her way through the minefield of issues

Choosing the best multi-manager from a growing number of high-performing candidates is no easy task when investors have to pass over the reins of control to what is essentially an unknown quantity, says Gregor Watt

A manager-of-managers portfolio balances different approaches and styles to minimise style risk and add value over the long term, says Tony Earnshaw

Peter Williams answers this month’s G60 questions on investment opportunities for holders of Sipps and SSASs post A-day, as posed by the questions below.

There’s more to finding a transition manager than looking one up in the Yellow Pages. Tim Wilkinson outlines how trustees might undertake a search for the right person

Hidden behind the popularity of the media-hungry Sipp, the SSAS continued to grow in strength throughout 2005, offering greater flexibility and lower costs. The future looks good for this niche product, says Ruth Emery

Identifying a scheme’s exposure to risks and acting to mitigate these will prevent long-term corporate damage and put the scheme into a much better position, says Andy Briggs

The case for outsourcing performance measurement to a specialist provider appears to outweigh the argument for retaining the capability in-house, says Ian Ratoff

Reflecting on another 12 months of variable performance from annuity rates, Peter Quinton advises retirees against delaying the purchase of their annuity for too long, as the overall trend has been towards lower rates in recent months

A combination of factors have driven investors to the peripheral dollar bloc and interest looks set to continue, say David Jackson and Ian Beauchamp

Royal London has appointed Tim Melville-Ross as chairman following the retirement of Hubert Reid.

Mike Hammer has left Hewitt Bacon & Woodrow to join the retirement team at Mercer Human Resource Consulting (Mercer).

Scottish Widows Investment Partnership (SWIP) has strengthened its UK institutional team with the appointment of Annabel Gillard as business development director.

Virginia Holmes has been appointed co-opted director and chair of the investment committee of Universities Superannu-ation Scheme, taking over from Scott Bell. She is currently non-executive director and chair of the audit committee of JP Morgan Claverhouse Investment Trust.