There are many things to look forward to in the world of pensions.
In February, the Government will defend itself in the High Court against 125,000 pensioners fighting for 3bn compensation after losing their occupational schemes.
The Government is accused of ignoring Parliamentary Ombudsman Ann Abraham’s ruling that it was guilty of maladministration and assuring employees their pensions were guaranteed. The Government is expected to say the pensioners should not have relied on Department for Work and Pensions leaflets and should have sought financial advice.
In April, Sipp regulation is set to come into force. The consensus appears to be this will lead to significant consolidation in the market, with many smaller Sipp players being snapped up by bigger firms.
The companies left standing will continue to prosper and benefit from consolidation, and new offerings, such as the Scottish Widows Sipp, will come to the market.
It is anyone’s guess how alternatively secured pensions will pan out next year once the Government’s pre-Budget report restrictions are enshrined in law.
Some argue that the 82 per cent tax charge on death benefits will effectively kill off Asps while others believe the product will continue to be a viable option for those in income drawdown who do not want to buy an annuity at 75.
Either way, the market for Asps is likely to be fairly small and criticism of the Government over its treatment of the product will rumble on.
The coming 12 months will see the development of the Government’s national pension savings scheme.
The delivery authority, with statutory powers, to oversee the implementation of personal accounts, could be introduced as early as the spring or summer and be operational by the end of the year.
There will be an anxious wait to see how this important body is constituted and who runs it. It will choose who runs the money if the second White Paper’s proposals are adopted for a Turner-style scheme with a default fund and a limited range of branded providers alongside it.
The Personal Accounts Bill, which will enshrine the proposals for personal accounts in law, is expected to be introduced at some point in 2007.
The debate over commission will continue in earnest, particularly with the FSA’s retail distribution review under way. The regulator has made it abundantly clear it is concerned about the insidious effect that high up-front commission can have in the pension market – both for consumers and the financial health of IFAs and providers.
A paper will be released in the summer but is unlikely to include any firm conclusions.
In spring, the Pensions Regulator is expected to consult on the thorny issue of “sweeteners” used by trustees to persuade employees to opt out of final-salary schemes. This is an incredibly complex area and one that some commentators believe poses a serious threat to IFAs. Aegon’s Stewart Ritchie and Syndaxi Financial Planning managing director Robert Reid both fear that IFAs giving advice to employees on whether to accept the sweeteners will be made the scapegoat if the customer loses out. Various measures to counter the practice of sweeteners, including taxing them, have been mooted.
The FSA could be carrying out a review of contracting out above the pivotal ages between 1988 and 1997. It is not expec-ted to discover systemic misselling but some predict that the probe will inevitably discover pockets of poor advice which could prompt hefty compensation payouts.