Top SIPP adviser Intelligent Pensions has launched a low cost SIPP plan aimed at high earning executives and professionals. The ‘Executive SIPP’ comes with a lean charging structure but offers exceptional added value. Intelligent Pensions will design and manage ‘bespoke’ investment strategies based on individual risk profiles agreed with each client to maximise performance on a risk adjusted basis.

The company is targeting mid-career high earners, who move jobs several times and need to ‘sweep up’ their legacy pensions into a coherent retirement portfolio after each job change. Managing Director, Steve Patterson, says, “There is a clear demand for this service and level of internet enquiries on the Executive SIPP has been just phenomenal, it has gone right to the top on search engines like Google.”

Many large employers now only offer ‘money purchase’ style benefits such as a group personal pension through an insurance company. These often have a relatively restricted choice of ‘in house’ funds and those that offer external fund links are relatively expensive. The investment choice is normally left to the member, with no monitoring or ongoing advice. Intelligent Pensions believes this ‘one size fits all’ approach will not meet the needs of high earners who will expect and deserve a more sophisticated retirement solution ‘tailored’ to their own personal needs.

With over 1,000 existing SIPP portfolios under management, Intelligent Pensions is able to access “institutional” investment funds at far lower annual management charges than are available to individual investors. The company provides an active asset allocation strategy geared to each client’s personal risk profile, with quarterly fund monitoring and annual reports.

The company is also a leading expert in the field of ‘pension drawdown’ and sees the flexibility of drawdown offering the natural exit strategy for high earners, rather than annuities. “For the modern higher earner retirement will be an evolving process and gaining control over the flow of tax free cash and pension income will be key” says Patterson. “We are offering an ‘end to end’ solution from mid career planning through to post retirement management.”

Full details are available from the company by e-mail.

 Investment View August 2009 

 

The stock markets both here and abroad have enjoyed a quite remarkable rise since the last Investment View, far better than we were expecting! The big question was whether that level would be sustainable against a continuing backdrop of economic uncertainty. Indeed, on the very day we were due to publish this month’s Investment View, the FTSE100 ‘gave back’ the previous 2 weeks of gains, falling at over 2% at one point during the day as confidence finally faltered – based not on domestic factors but what was happening in the far east.

China’s £355bn stimulus package to boost domestic demand has helped boost their economy, which grew by 8% in the second quarter. But on August 17 Shanghai Index suffered its 12th largest fall on record – a drop of around 6% – putting their market 17% lower than just a couple of weeks earlier. The impact around the world was an immediate sharp fall in equity prices, and the Vix index of US equity volatility jumped 15 per cent, its biggest one-day rise since April.

It is now almost universally accepted that the worst is over and equity markets have bottomed out. But since last September and the collapse of Lehman Bros. markets have been driven by fear rather than hard evidence. Volatility will therefore continue for some time, so don’t be surprised if at some stage we return to the levels of mid June before the year is out. Positive earnings results have provided much needed good news, but may just reflect short-term management action rather than real improvements.

Nevertheless our view remains that equities in the developed economies have probably not yet reached ‘fair value’ on fundamental analysis, but they will have a rocky road to follow before that happens. This is the price that investors must pay for the continuing uncertainty.

The recent impressive run in the FTSE, as shown in the graph, suggested the beginning of the end for the recession, and the start of a new trading range for major markets. However, trading volumes have been relatively low and markets have been vulnerable to a loss of confidence. As ever, on volatile trading timing is almost impossible either to predict or to react to without losing heavily.

The FTSE 100 had broken above its 200-day moving average – a commonly used technical measure of the long-term market trend. The next few weeks will tell!

Britain has its own unique problems – the economy could still suffer a secondary downturn, driven by rising taxation and cuts in public expenditure. As I have said consistently there is a major adjustment taking place, one that will continue for years, as the effects of the credit crisis take their toll.

Interest rates will continue to remain low, and there is still some risk that we will suffer a degree of deflation in the UK economy well into 2010. Against that backdrop the Government is adopting a ‘wait and see’ approach, continuing to encourage economic stability, through both low interest rates and quantitative easing, albeit this now looks to be slowing.

UK unemployment is approaching 10%, and although consumer spending has been more resilient than many expected, the order of the day for many businesses and households is still ‘debt reduction’. The pressure on employment levels is sure to continue as companies strive to improve efficiency and remain competitive. The housing market will remain subdued for the foreseeable future although there are some modest signs of increased activity. Britain’s trade deficit in goods and services grew by £300m to £2.2 billion in June. The overall output price index for manufactured products fell by 1.3% in the year to July, to reach the lowest annual rate since November 2001.

The Bank of England says the timing and strength of the UK’s economic recovery remains “highly uncertain” despite the considerable fiscal stimulus packages. In its quarterly inflation report the BoE said the recession appeared deeper than previously estimated and GDP fell further in the second quarter of 2009. Credit conditions remain tight as banks continue to repair the damage to their balance sheets. Nevertheless the consensus view from economists is that the stimulus from quantitative easing and low interest rates should sustain a gradual recovery in economic activity.

Government bonds have also priced in a reasonable degree of economic growth but any indications of current fiscal policy having ‘overshot’ the mark will likely result in the price of conventional gilts falling. We think this will remain a significant risk, as the longer term effects of the low interest rates and increased money supply are at this stage very difficult to predict with any certainty. Corporate bonds should continue to improve with lowering of the yield spread against gilts. However, the uncertain inflationary effects of economic stimulus measures could mean that in due course the spread is narrowed more by gilt yields rising (prices falling) rather than corporate bond yields falling (and prices rising). We will maintain a close watch although the level of new issuance remains strong which is encouraging.

The Bank of England’s Monetary Policy Committee (MPC) has decided to keep the official bank rate at 0.5%, and has poured another £50 billion into its quantitative easing programme. This takes the total amount spent so far on quantitative easing to £175 billion. In the minutes of the MPC’s last meeting, released on August 6, the committee says the recession has been deeper than it previously assumed, with GDP falling further than expected in the second quarter of this year. However, the pace of contraction has slowed.

Elsewhere in the US GDP gains reached their highest level since 2003 in the second quarter, up by 0.5%, and much better than the 1.5% contraction forecast. The ECB also expects a gradual recovery. Following its decision to keep rates unchanged at 1%, Jean-Claude Trichet, the president of the ECB, said the pace of contraction is clearly slowing down. However, economic activity is expected to remain weak this year.

The UL commercial property sector remains subdued but property, perhaps more than any other asset class, is a long-term investment. The IPD UK All Property index has underperformed the FTSE 100 over one, three, and five years, but over ten years, the index has outperformed the stock market. Property therefore remains an important asset class for our clients.

Despite recent poor performance its income stream tends to be steadier and volatility is much lower than for equity. While all asset classes tend to converge in times of crisis, in normal circumstances, property adds significant diversification benefits. On top of this, the outlook for the property sector could be brightening.

Fiona Rowley, manager of the M&G PP Property Fund says: “I’m definitely seeing improved investor appetite and it’s from both domestic and international markets, the near-term is going to remain challenging however when looking at UK commercial property it is somewhere below what we consider long-term fair value. The UK now appears to be the best value core commercial property market”.

Our message remains that all the major asset classes, perhaps with the exception of conventional gilts, have good investment potential in the medium-term. But as markets gradually recover there will continue to be unpredictable set backs, and this will remain the case as long as confidence remains fragile. Only through the cathartic process of such short-term market ‘booms and busts’ will true value be found, and the volatility will become gradually dampened as the excesses of optimism and pessimism are progressively forced to give way to fundamentals and good old-fashioned common sense!

 

Steve Patterson

Investment and Managing Director

 

 

Article: Solvency II rules spell ‘regulatory overkill’ – ABI | Publication: Financial Adviser | Date: 13th August 2009 | Author: Joy Dunbar | Quoted: David Trenner

 

At the start of last month, the Committee of European Insurance and Occupational Pensions Supervisors, known as CEIOPS, issued 24 consultation papers (numbering 1100 pages in length) on the implementation of Solvency II.

Solvency II rules look at the prudential regulation of insurers, including capital requirements, and aim to be standardised across the EU.

The current raft of papers recommend insurers’ risk free interest rate structure should normally be based on the yield on relevant government bonds, which is a change from early rules where swap rates were used.

The papers set out a number of criteria that risk free term structures should fulfil, the default choice being government bonds unless they do not meet one or more of these criteria.

But it states UK government bonds do not currently meet these criteria.

Jonathan French, assistant director of media relations for the ABI, said the committee had been overly cautious about the capital adequacy of insurance companies and this approach would be detrimental to the industry.

Annuity providers will be particularly affected by the increased capital levels, according to Mr French.

He added the UK has an unique system of annuity provision and it is an issue that affects the insurer and the customer.

He said: “The committee has taken the worse case scenario and the most cautious approach and wants insurance companies to increase its capital requirements.

“We already have enhanced capital requirements in the UK as a result of issues with pensions in the 1990s and at the start of the 21st century.”

David Trenner, technical director of Glasgow-based IFA Intelligent Pensions, said: “If there is less chance of insurance companies failing then the new requirements are a good thing.

“In the past we did not have to worry about insurance companies going bust. You cannot afford insurance companies going bust because it undermines the public confidence in annuities and pensions.

“As result of the Solvency II regulations we might see less generous annuity rates, but there are so many factors involved. We do not have a balance with regulation.”

Meanwhile, consultants Towers Perrin revealed it could take more than 1000 man hours of specialist resources to properly analyse, understand, respond and train senior management on the implications of the new regime.

It said the supervisors have already issued more than 24 consultation papers, which total more than 1100 pages detailing the new framework.

Naren Persad, senior consultant within the Tillinghast insurance consulting business of Towers Perrin, said Solvency II requirements were likely to be the number one priority for companies in the next few years.

He said: “The investment is essential as in the end it will ensure the final Solvency II system sets standards which are practical and achievable. The insights from the consultation projects will also help companies as they launch their internal Solvency II projects.”

 

Contact David Trenner to discuss any of his comments from this article

Article: Standard Life raises MVRs for some with-profits policyholders | Publication: Money Marketing | Date:  11th August 2009 | Author: Nicola York | Quoted: David Trenner

 

Standard Life has raised the market value reductions on with-profit unitised pensions but has reduced the MVRs on with-profit bonds.

The MVR on 0 per cent fund regular payments unitised pensions has risen from 6.1 per cent in January to 7 per cent in August.

Those policyholders with repriced funds regular payments unitised pensions will see their MVR jump from 4.1 per cent to 6.8 per cent.

But with-profits bonds MVRs will reduce from 10.7 per cent in January to 9.9 per cent in August.

It has maintained the annual bonus rates on its with-profits funds but says many plan values will be lower than a year ago due to poor returns from investment markets.

The life office says that many customers will benefit from payout guarantees and the smoothing that we are applying to maturity and retirement payouts.

A 20-year savings endowment plan taken out on 11 August 1989 by a man aged 29 for £50 per month has a maturity value today of £17,986.

A 20-year individual pension plan taken out on 11 August 1989 by a man retiring at age 65 for £200 per month has a retirement value today of £83,086.

A with-profits bond investment of £10,000 on 1 August 2004 has a cash-in value today of £12,046.

Intelligent Pensions technical director David Trenner says: “With-profits was designed to protect investors from falling markets, which it has failed to do in recent years. Investors need to bite the bullet now and get out of these funds into something which does what it says on the tin, whether that is guaranteed equity or equity funds which can rise and fall. Ironically Standard’s stakeholder with-profits fund is their only fund to be unaffected, and that is precisely because it is not a true with-profits fund.

“Guarantees would have been great if they had protected clients when markets were tumbling, but because of MVRs they didn’t. Standard Life with-profits policyholders are now being hit by a double whammy, with funds underweight in equities as the market fights back.”

Standard Life Assurance with-profits communications manager Margaret Flaherty says: “Despite the very recent positive movements in the stock market, investment returns have in general been poor over the last year and market volatility has continued. Because with-profits is designed to limit the effects of fluctuations many customers will be shielded from the full impact of this market volatility at their maturity and retirement dates.

“While payouts in many cases may be lower than a year ago, most investors with plans maturing now will not have been affected to the same extent as direct investors in the stock market. They may also have guarantees on their plans which are especially valuable in a depressed market.”

 

Contact David Trenner to discuss any of his comments quoted in this article

Article: Adviser slams BA trustees’ decision | Publication: Corporate Adviser | Date: 1st August 2009 | Author: David Trenner

 

The decision by BA’s pension trustees to release the employer from £330m of guarantees which were provided just 3 years ago will have a wide impact on pension schemes throughout the UK, says Intelligent Pensions technical director David Trenner.

A letter from the chairman of the trustees of one of the company’s final salary schemes said: “It is apparent to the trustees that improving the company’s liquidity position, ie the amount of cash the company has available, in the short term is very important. An improving liquidity position will serve as a buffer to sustain BA through difficult trading conditions while it makes permanent changes to its cost base to ensure its onoing viability.”

Trenner says: “What the trustees are effectively saying is that if the company goes under, the PPF can pick up the tab. But the PPF is funded by other pension schemes which cannot be expected to pay ever-increasing levies to enable schemes like the BA scheme – a pension fund with a smaller company attached to it – to behave in such a cavalier manner.”

 

Contact David Trenner to discuss this article

Investment View July 2009 

 

It is now official! After several months of raging battle between the ‘bulls’ and the ‘bears’ about where the stock market was heading, we now seem to have some equilibrium. In one sense this is good news, as it indicates the new reality of the ‘post credit crunch’ world, and to that extent future expectations can be reassessed with a greater degree of confidence. Assuming for the moment that the weight of opinion is fairly evenly balanced, the question for advisers and clients is how long will equity markets continue to drift sideways?

Over the past 20 years UK equities have achieved an average annual return of 7.5%, and long term analysis tells us that equities on average produce a return around 5 to 6% above inflation, taking dividends into account. There is no reason to assume that this will not hold good as a long term future assumption. Inflation looks as though it is going to remain low for some time, and any assets yielding 5% p.a. or better are therefore looking relatively attractive.

However, what we have seen over the last decade is that over short timescales the divergence from the long term average has been excessive, and that makes predicting medium term performance far more precarious. That is why asset allocation is essential, and as our drawdown clients have seen over recent months having the right mix of assets really pays dividends in counteracting the short to medium term unpredictability of equities.

As ‘financial planners’ (and hence at the opposite end of the spectrum from the ‘day traders’) our role has always been providing long term investment advice, which tends towards the contra-cyclical approach. In simple terms that means buying when assets look cheap and selling when they look over priced.

Investment markets are of course made up of lots of ‘players’ not just long term investors like our clients. And so although we appear to have equilibrium involving all the participants that make up the market, the current price still looks relatively attractive for our clients.

The chart below, courtesy of M&G, shows how stock markets have moved in practice over the past 20 years, as measured by the FTSE All-Share Index based on returns from the start of each month over every single one, five and ten year period. It shows the average returns per annum over each of these periods and the likelihood, on average, of investors having made money or lost money in each.

While this simple analysis may offer clients some reassurance, there is no doubt that in the short and medium term equity values will remain volatile. We will therefore continue to take advantage of that where possible, buying into the ‘dips’ and selling the ‘gains’ to consolidate portfolios and pay out withdrawals.

Those investors who have not yet reached retirement or who are in the early stages of drawdown should still maintain a high equity content. The maximum we recommend is 90%, which enables clients to keep some ‘ammo’ in reserve to take advantage of a fall in prices. Lower levels are appropriate for investors with cautious views on investment risk or who have a very high level of dependency on their private retirement fund.

The basic underlying strategy is to ‘harvest’ investment gains during the drawdown period (while avoiding crystallising losses) with a view to a gradual consolidation of the portfolio as clients progress through retirement.

This has worked well and continues to be an approach supported by high level external analysis, such as the European Fund and Asset Management Association (EFAMA) definitive research paper – ‘Rethinking Retirement Income Strategies – How Can We Secure Better Outcomes For Future Retirees’ (Maurer and Somova) of February 2009.

There will continue to be many factors creating a drag on economic recovery. Government debt in the UK has risen to around £800bn which is well above 50% of GDP and the highest level since records began in 1974. Meanwhile, tax receipts fell by 10% in the past year – the biggest fall since 1923. The British Retail Consortium (BRC) predicts that about 15% of high street shops will be empty by the end of 2009. The National Institute of Economic and Social Research (NIESR) sees total UK GDP falling 4.3% in 2009 before growing 1% in 2010 and 1.8% in 2011 implying a slower rate of recovery than was expected and a leading think-tank is now predicting it may take another five years for income per head to return to the level it was before the recession.

All rather gloomy, but don’t forget a lot of that has already been priced into the markets.

There are positive signs as well, for example the Nationwide survey of UK house prices up for the second month out of three. The government is determined to keep the recovery going and it is clear that there will be no tightening of fiscal policy until after the general election. However, the state of the public sector finances is a real worry in the medium term (the words ‘dreadful’ and ‘appalling’ are appearing ever more frequently) and there is a risk that sterling will suffer, putting further pressure on the cost of imports. The flip side (as ever) is that exporters will gain and also the returns on overseas assets may be enhanced.

Inevitably our collective belts will eventually need to be tightened, through reduced public sector spending and increased taxes, and that pain will last for some time. However, as I said in last month’s issue the starting point has been one of relative affluence, and in many cases it will be the future generations that ultimately pay the price through reduced wealth preservation.

Elsewhere, in spite of continuing concerns about the lateness of the action taken by European central bankers the Markit iTraxx Europe Index, an important barometer of European appetite for risk in the credit markets, has improved to a level not seen since before the Lehmans collapse last September. In Germany the IFO index of business sentiment has been rising We are therefore maintaining our strategy of diversify out of the UK into Europe through funds that have a particularly strong pedigree in the Eurozone markets, with the emphasis remaining on ‘large cap’ companies.

In the US interest rates are likely to remain low for some time, but their economy is proving more resilient than many had predicted 6 months ago, and US house prices actually rose in May. The rise in unemployment is showing signs of a slowdown as well. These are important factors for other economies around the world as the US consumer plays such a major part in driving demand. The main emerging economies are also showing plenty of resilience and China saw record sales of cars in recent months.

Stock markets around the world have therefore continued to make progress, as there are signs that the global recession may be past its worst, with improved consumer confidence. This rally is suggesting a ‘V-shaped’ global economic recovery but many analysts still think that is unlikely, and our portfolios that are supporting withdrawals will continue to hold some defensive funds for that reason. The risk of moving to a ‘W-shaped’ recovery is still significant and indicates to us that rebalancing decisions should be more aggressive than might be the norm, taking advantage of shorter term gains.

The problem is deciding where to rebalance into so as to consolidate gains! Interest rates are set to remain low for some time and so cash looks distinctly unattractive. Property and corporate bonds on the other hand are offering much better yields, and well managed funds will look to ensuring that the ‘trade off’ against default risk (which will continue to be an issue until we emerge from the recession) is at an appropriate level.

The emphasis will therefore be on careful asset allocation, regular monitoring and continuing close analysis of the investment strategies of fund managers. We will continue to favour ‘active’ funds against ‘trackers’ and concentrate on those who have scored well on both quantitative and qualitative analysis within their investment sectors. We will not, however, be drawn into a short term performance mindset since many of the investment ‘plays’ by fund managers at stock selection level will take time to achieve their objective.

During recovery periods there will be always be short term winners, but picking them out in advance is impractical. Hindsight is such a wonderful gift and anyone with a rear view mirror can easily pick the winners! Equally, there is a tendency to think about increased security after the event – hence the upswing in demand for products offering guarantees, at a time when these guarantees are at their most expensive and in a period when they are least likely to be needed, since the market had already fallen. Closing the stable doors after the horse has bolted springs to mind!

Of course for some investors the grass will seem greener on the other side, but believe me (and other investment professionals) – this is just an optical illusion – a trick of the light – so don’t be fooled! As the Financial Services Authority will tell you, recent past performance offers absolutely no guide whatsoever to future returns.

 

Steve Patterson

Investment and Managing Director

The assessment process

Article: Consultant view: An international standard in the bag | Publication: Citywire | Date: 23rd July 2009 | Author: Michelle Hoskin | Focus: Simon Pearson

 

Intelligent Pensions’ Simon Pearson took the route to ISO 22222 certification to measure up his own and his company’s standards and found it helped with moves into the new model of working, writes Standards International director Michelle Hoskin.

Simon Pearson, a retirement analyst for Intelligent Pensions, became one of the first specialist financial planners in the UK to achieve ISO 22222 certification.

Already equipped with 30 years’ experience in the profession and his chartered financial planner status, Simon has been advising clients on phased and income drawdown strategies for more than seven years.

Glasgow-based Intelligent Pensions is well known for being a professional, well-run organisation that supports its advisers through an extensive, high-level training programme. As a result of its commitment to professional best practice, its internal training and development programmes have been extended to include the fundamental elements of ISO 22222.

Despite Simon’s area of speciality, he went through the same ISO assessment process as that of a general financial planner. This started with a one-day gap analysis, which he says was the most valuable step in the process because it gave him the opportunity to identify how his individual practices, as well as those of his company, fair against the requirements of the international benchmark.

One of the key areas for improvement was centred on the need to adhere to the information security requirements as outlined in the standard. Despite an already robust set of systems and controls, the gap analysis identified improvements that could be made both at individual and firm level.

This was compounded by Simon, being a remote worker, having to be flexible about the locations where he works, which can vary from the offices of the firm’s IFA partners, at a client’s home or office, and at times from his own home. The security Simon and his firm needed to consider for his laptop and the client data transmitted and stored was much greater than that of an office-based adviser.

The implementation stage

During the implementation stage of the certification process, Simon and the team worked hard to address these issues by putting in place lockable storage facilities, more robust laptop security measures and most importantly an information security policy – which now sits at the core of the controls to which the advisers and the firm now adhere.

With key elements of information security, client confidentiality and data protection, ISO 22222 is not just about financial planning, but is also about demonstrating professional best practice in all areas of the business and individual processes. As a result of being assessed by an impartial and independent organisation, Simon’s team are now confident they are demonstrating market-leading best practice.

After being awarded the ISO 22222 Simon said although it was yet another certificate, he had a different sense of achievement, one that prompted a time for reflection.

Well-rounded planner

Simon believes that while the retail distribution review (RDR) highlights the importance of paper qualifications, ‘there is also a growing sense in the profession that the application of knowledge, experience and application skills are essential ingredients to being a well-rounded financial planner’.

‘This is a time for real change and I am thrilled that Intelligent Pensions have set the standard in the pensions market place by leading the way with ISO 22222 certification,’ he says.

‘I believe this allows us to prove to our partners and clients that we are fully embracing the RDR goal to improve the standard of professionalism to a level that inspires customer confidence. I can also report that clients have been truly impressed and their perception of me as a professional and trustworthy financial planner has increased.’

Towards the new model

As a result of successful certification, Simon says he has seen an all round general improvement in the support he receives from colleagues and a willingness by all staff to do more to foster better relations with clients – ‘which is great thing as we move into the new model of working’, he says.

With their annual business review audit due at the end of June, Simon and the team are looking forward to having their new best practice standards reassessed to make sure they are being maintained at the highest level possible.

Simon and the team at Intelligent Pensions are unique. It has been an honour for us to work with advisers that strive for such a high level of professional excellence in everything they do.

                                                                                                                                           

An honours graduate from the University of London and with over 20 years experience in financial services Simon has a wide knowledge of all aspects of financial planning with particular expertise in pension planning for higher value clients. In his last post he was area manager for a major pensions provider and has attained AFPC qualification status including G60 Pensions qualification and specialist qualifications in Investment and Taxation & Trusts.

Simon is Intelligent Pension’s regional consultant for the South of England.

See our other consultants

Article: Pensions Regulator publishes new code, guidance | Publication: Financial Adviser | Date: 23rd July 2009 | Author: Dominic Welling | Quoted: David Trenner

 

In an attempt to educate advisers and trustees on the issues surrounding pension risk transfers, the Pensions Regulator has launched a new module into the trustee toolkit focusing on buy-ins and partial buy-outs.

The module has been launched to provide guidance to those considering transferring pensions risk to insurers.

It will cover topics such as what is actually meant by buy-in and partial buy-out and explain what exactly are the differing roles of the employer and the trustee.

In addition the module will provide guidance on the options and schemes’ objectives, as well as educating on the data management and administration of the schemes and the process of bulk annuity purchase.

Furthermore, the toolkit module has been published alongside a new code of practice entitled Circumstances in relation to the material detriment test, which has been designed to sustain effective long-term protection of members’ benefits and the payment protection fund, including to enable the regulator to act to prevent transfers to inappropriate vehicles.

This is accompanied by high-level guidance and illustrative examples of the new material detriment test and code. The regulator’s clearance and abandonment guidance have also been updated for accuracy.

Tony Hobman, chief executive of the Pensions Regulator, said: “I hope the new code, guidance and addition to our toolkit will be helpful.

“By working in close consultation with the UK pensions industry, we can ensure the right balance between innovation and protection in the UK as the defined benefit landscape changes. This must include a fair and level playing field for all, matched by effective enforcement where necessary.

“Employers should not be unduly concerned but should undertake appropriate due diligence when considering transactions that affect the pension scheme. Employers must also remember that they can come to the regulator for clearance if they seek certainty.”

David Trenner, technical director for Glasgow-based Intelligent Pensions, said: “The trustee toolkit is an excellent programme of pensions training, which is of use to all trustees and also to those of us advising on pensions.

“Although the writing is on the wall for private sector final salary pension schemes, their death will be slow and could be painful, and the pensions regulator is right to keep updating the toolkit and to issue new codes of practice.

“De-risking pension schemes means buying guarantees, and guarantees cost money. This means that at a time when employers are looking to reduce contributions – or at the very least not to increase them – guaranteeing benefits for one group of members could weaken the position of other groups. Pensioners get the greatest protection from the PPF, so it is actives and the deferred who could be at risk if the trustees decide on a bulk buy-out.”

 

Contact David Trenner to discuss any of his comments in this article.

Article: Amex staff to lose out from investment upswing | Publication: Pensions Week | Date: 20th July 2009 | Author: David Rowley | Quoted: David Trenner

 

Cutting employer pension contributions to help businesses defer redundancies or pay freezes could hit employees ability to gain from an investment upswing.

The warning has been made as staff at American Express UK accepted the move to end employer contributions for an 18 month period into their stakeholder scheme.

The credit card company has announced 11,000 redundancies worldwide in the last year and it is believed staff accepted the pension cuts to avoid further redundancies or pay freezes.

Employees at the firm were able to get a maximum 9% employer contribution.

Robert Ross, director, investment strategy and advice, Russell Investments said: “If the market does recover over the next 18 months as the recession bottoms out it could be an expensive period to miss contributions.”

The practice of cutting employer contributions in a downturn is common in the USA and there are fears that the American Express move here could make that more acceptable.

However, consultants at Towers Perrin and Aon Consulting and leading providers have all said that they are only aware of one or two clients having made this move so far.

Intelligent Pensions technical director David Trenner pointed out that the opportunity to make such cuts would go by 2012.

“Unless the incoming government changes the pensions legislation, then from 2012 such reductions in contributions will be illegal,” he said. So Amex are cynically cutting contributions now while they can. Employees can do very little to protect their rights in the current recession and Amex knows this.”

 

Contact David Trenner to discuss any of his comments from this article.

Article: Skandia fears further curb on pensions relief | Publication: Money Marketing | Date: 9th July 2009 | Author: Hannah Stodell | Quoted: David Trenner

 

Skandia is warning that the Government could further restrict higher-rate tax relief on pensions to raise revenue.

It says tax relief on contributions made by salary sacrifice or as personal contributions to an occupational pension scheme could be 60 per cent for people earning £100,000 £112,950.

The removal of higher-rate tax relief on pensions for people earning over £150,000 is expected to affect around 291,000 people but Skandia says the Government may restrict relief further to affect over three million people who are higher-rate taxpayers but earn less than £150,000.

Gross pension tax relief is estimated to have cost the Government £29.3bn in 2007/08, with a quarter of this sum going to the 1.5 per cent of savers earning over £150,000.

The Government expects to increase revenue by £3.1bn thr-ough the changes to higher-rate pension tax relief but Skandia says: “This represents just 11 per cent of the total tax relief given to pension contributions and it is likely that further measures will be needed to tackle unprec- edented borrowing levels which are anticipated to total £528bn over the next five years.”

Head of tax and financial planning Colin Jelley says: “It is important that the estimated 3.3 million people who are higher- rate taxpayers and are not yet caught by any restrictions to tax relief on pension contributions consider accelerating their pension funding if they can in case any further restrictions are imposed.”

Intelligent Pensions technical director David Trenner says: “If you have got money and you are earning enough to be eligible for 40p tax relief, grab it while you can. Current rules can be changed by this Government without any compunction.”

 

Contact David Trenner to discuss any of his comments from this article.