Govt U Turn on protected rights in SIPPs

dunstonh

It is reported now that the Govt will not allow SIPPs to hold protected rights from next April. It was widely expected that they would but that no longer looks the case.

So, it looks like fund supermarket pensions/hybrid SIPPs will be the main option for those that want unit trust funds for their protected rights.

Of course, the way the Govt keeps U-turning on pensions, who knows what will happen.

another issue related to regulation of SIPPS is that the FSA has said it "has only received a handful or applications for SIPP regulation" just 3 months before regulation is due to apply. If you are going down the DIY SIPP route, make sure your SIPP provider will be authorised and regulated post April 2007.

EdInvestor

This report says that the plan to allow it from April has been delayed until the end of the year, to allow the DWP to investigate the annuity market.There is allegedly concern that spouses could be left without a PR pension if all distinctions between pensions were abandoned.

So, it looks like fund supermarket pensions/hybrid SIPPs will be the main option for those that want unit trust funds for their protected rights.

This issue affects people who want to invest PR money in shares within a SIPP, not in unit trusts. It also affects those who want to take benefits and put the PR part of their pension into drawdown along with the non PR part.This is currently quite legal,

BUT

...the insurance companies discriminate against all but the very rich. :mad: They only allow very large protected rights pensions >100k to use their drawdown plans.Sipps will take smaller funds but are banned from accepting PR money.

So ordinary people are effectively banned from using a perfectly legal and advantageous way of taking their pension income.Yet again the pension system is being organised to suit the rich at the expense of normal people.

It's a disgrace.

dunstonh

This issue affects people who want to invest PR money in shares within a SIPP, not in unit trusts. It also affects those who want to take benefits and put the PR part of their pension into drawdown along with the non PR part.This is currently quite legal,

Most that invest in SIPPs, end up picking unit trusts. So having an alternative that does this) isnt a major problem. Although not many would know that such an alternative exists unless they read here.

BUT

...the insurance companies discriminate against all but the very rich. :mad: They only allow very large protected rights pensions >100k to use their drawdown plans.Sipps will take smaller funds but are banned from accepting PR money.

Some not all. Those that still do are doing so because the FSA treats income drawdown for plans under 100k as being high risk. In a regulated industry where you have claims companies highly active, you are going to see some act on the side of caution.

However, as many dont have the restriction you suggest they do it doesnt really apply.

So ordinary people are effectively banned from using a perfectly legal and advantageous way of taking their pension income.Yet again the pension system is being organised to suit the rich at the expense of normal people.

No they arent. Only people that dont know what they are doing or want something other than pension or unit trust funds are going to be penalised.

EdInvestor

However, as many dont have the restriction you suggest they do it doesnt really apply

Which providers offer drawdown for protected rights funds under 100k?

And why do they look at PR money in isolation, since the vast majority of people have two pensions side by side, one PR and one not. I ran across a person recently who was being refused drawdown for two pensions (one PR one non-PR) both worth nearly 70k, toal fund nearly 140k,on the basis his funds were under 100k.

That's ridiculous.

Most that invest in SIPPs, end up picking unit trusts.

Possibly they do but that's not the point. Those people can use other vehicles to pick their unit trusts.It's the people who want to pick shares who are discriminated against because you can only do this in SIPPs.

Pensions are now getting very risky, it has to be said.

dunstonh

Which providers offer drawdown for protected rights funds under 100k?

Selestia comes straight to mind. I did a £30k fund last year with them and the bulk of that was protected rights. Im not on the right PC to do a wider check but they are not alone.

I ran across a person recently who was being refused drawdown for two pensions (one PR one non-PR) both worth nearly 70k, toal fund nearly 140k,on the basis his funds were under 100k.

That's ridiculous.

If you go to a FIAT garage and ask to buy a brand new Vauxhall they are going to say you cant. You have to go to the right place. There are providers that can. I think you will see an increase in that front as well as more providers launch their post A day product.

The Govt U turns on pensions over the last year havent helped providers feel confident in launching new products.

EdInvestor

dunstonh wrote:

Selestia comes straight to mind. I did a £30k fund last year with them and the bulk of that was protected rights. Im not on the right PC to do a wider check but they are not alone.

Do you mean this thing?

http://www.selestia.co.uk/literature/CRA%20KF.pdf

The charges are awful.No comparison with SIPP charges.

dunstonh

How are the charges awful when they can be lower than HL?

EdInvestor

HL's charges for drawdown may be awful as well, I haven't checked.

But Sippdeal's charges aren't.

Why should people be forced to pay as much as 3% a year (adding in the implicit fund transaction charges) when SIPPs can offer the same service for less than 0.1% if you manage them sensibly?

Hasn't the DWP noticed that the thrust of the Government's pension policy is to get charges down? :mad:

dunstonh

Selestia has the £78.08 membership charge (per person, not product) and £50 p.a. drawdown charge. They are the only charges on the wrapper and not charged VAT)

HL has £75 plus VAT on each GAD calculation, £10 plus vat on payment amendments and £25 plus VAT on ad hoc payments.

Sippdeal is:
Set up unsecured pension (USP), including paying any lump sum benefits £150. Set up alternatively secured pension (ASP) at age 75 £150. Pension payment £10 per instalment. USP and ASP Reviews £75 per review (all subject to VAT)

Not a great deal in it but I have to say that I dont find any of those awful. The £10 per installment on Sippdeal seems a bit heavy and would make that the most expensive of the three if you go with monthly payments. Why do you think Sippdeal is cheapest?

EdInvestor

Selestia has effectively an annual charge of 128 pounds pa and then rising in an unspecified and possibly expensive percentage-based way.The others have no annual fee, except a tenner for an annual drawdown payment at Sippdeal.If you hold shares at Sippdeal and rarely trade, your costs are negligible. Those items you mention are all one-offs - the GAD review is every 5 years so I guess you have to add 15 quid a year for that, grand total of 25 quid.

What I don't understand about the DWP statement is that they talk about annuities, and concerns about joint life pensions.

But SIPPs are an alternative to annuities.Annuity arrangements are irrelevant.
And there are clear arrangments for survivor's pensions in SIPPs - ranging from continuing in drawdown, buying an annuity with the fund or taking it in cash minus 35% tax. Definitely no possibility of a survivor being left with no pension.

So what's their problem?Can it be connected with the Government's plan to phase out contracting out in 2012 (also mentioned by the spokesman)?

dunstonh

Sippdeal is per payment. 12 payments a year - £120 plus vat.