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DWP isn’t for U-turning

I note the news item about a so-called U-turn on protected rights but believe it is incorrect (Money Marketing, January 11).

When I was on the Association of Member-Directed Pension Schemes committee (I retired in August 2006), I led discussions with the Department for Work and Pensions and have continued to lobby for the DWP to look at the issues surrounding the creation of a level playing field for the investment of protected rights.

In addition, I have lobbied for the bizarre situation to be rectified in which the legislation as set out by the DWP permits an appropriate personal pension to hold non-protected rights (Sipp assets) whereas a Sipp is not permitted to hold APP assets (protected rights). This was bad implementation of what had been agreed in industry discussion, namely, that protected rights could sit within a Sipp scheme albeit with different investment scope.

These are some points that you might like to consider.

– Sipp schemes may not accept protected rights. An APP scheme can accept non-protected rights but we see no point in trying to transfer Sipp assets to our APP as the cost of re-registering assets and the effort would be prohibitive. At European Pensions Management, however, we are able to report on Sipps and APPs collectively so, apart from the extra cost of having to maintain two schemes, the position for members is as if the Sipp and APP were combined, apart from the investment scope.

– EPM set up its APP to overcome issues arising from the inability of Sipps to accept protected rights and simplify the transfer-in process for members and IFAs.

– The DWP has never committed to introducing wider investments from April 6, 2007. It has only committed to a review of the position once the new permitted activity of establishing, operating and winding-up personal pension schemes comes into force on April 6, 2007. It would seem likely that the DWP would wait for the new regime to bed in before reviewing the position. This could be months or even years. There are many who seem to have misunderstood this point and have have assumed that wider investment would be permitted from April 6, 2007, which has never been the case.

– In the DWP’s consultation paper (Abolition of defined-contribution contracting out: treatment of protected rights accrued in the past and proposed operational arrangements, September 2006), it considers the abolition of protected rights from 2012. Legislative delays could push this date further out still.

– The DWP is focusing all its resources on the national pension savings scheme. It is aware of market concerns about the protected rights position with regard to an unlevel playing field between different types of provider. However, there does not appear to be any immediate commitment to review any of the above.

– EPM’s APP pays cash at 0.25 per cent under bank base rate, giving a current effective rate of 5 per cent on cash held following the base rate rise to 5.25 per cent on January 11, 2007. Deposits are held at the Bank of Scotland.

– EPM only accepts protected rights as part of a transfer of non-protected rights and it does not allow minimum contributions (contracting out of S2P).

– EPM does not make any charge for the transfer in of protected rights, making the already very attractive Sipp charges even more competitive.

Francis Moore

Managing director,

European Pensions Management


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