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Dwp accused of deviating from simplification over protected rights transfers

The Department for Work and Pensions has been accused of moving away from the concept of pension simplification by not allowing self-investment of protected rights.

Sipps will get wider investment freedom but investors will not be allowed to transfer their protected rights into a Sipp.

This means that billions of pounds locked away in protected rights will continue to be restricted to investing in insurance company and cash funds. Trade bodies, including the Sipp Provider Group and the ABI, are understood to have lobbied the Government but product providers say the rules are unlikely to change.

Suffolk Life sales and marketing director John Moret says the rules fly in the face of pension reviewer Alan Pickering’s concept that “a pension is a pension is a pension”.

Moret argues that insurance funds can be as risky as any direct investment so the restriction is difficult to justify.

He says: “The Government is saying certain types of investment are fine and others are not and in particular they are saying insurance funds are fine but direct investments are ruled out. It creates a halfway house and does seem a bit small-min-ded and out of line with how the market seems to be moving.”

DWP spokesman Sam Michaelides says: “Protected rights derive mainly from National Insurance rebates which are meant to deliver benefits much like S2P and are not to be invested where there is an increased risk of incurring losses.”

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