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Confusion surrounds Sipp protected rights

The Department for Work & Pensions has declared that Sipps are mainstream schemes and can hold protected rights.

But deespite lengthy lobbying for the change, the industry has criticised the DWP for failing to provide clarity on how this will work in practice.

There is confusion surrounding whether protected rights pots can be held within Sipps alongside existing money or whether they will still need to be covered by separate scheme rules, which would make the change more of an admin headache and fly in the face of pension simplification.

Providers say they are left treading water as the changes will not be introduced until April 2007, when Sipps bec- ome regulated.

Winterthur Life pensions strategy manager Mike Morr-ison says he is unable to see at this stage how the DWP’s recommendation will come into effect without further clarification.

Hargreaves Lansdown head of pensions research Tom McPhail says he believes Sipp numbers may be boosted by the announcement following the disappointment of residential properties not entering the Sipp world.

Norwich Union head of pensions Iain Oliver warns that rebates on protected rights are, in many cases, insuffic- ient to make it worthwhile investing in a Sipp and is urging advisers to consider telling clients to opt back in to S2P.

Oliver says: “There is clearly still nervousness about prot-ected rights for self-investment. Our interpretation is that there will be a two separate products under one scheme rule and the protected rights will not be under a Sipp product.”

Suffolk Life sales and marketing director John Moret says: “The DWP is exposing us to more unnecessary delay. It does not have a clear attitude and has during the consultation and arguments stuck its head in the sand.”

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