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Investment view

Last week saw our annual investment conference take place in London. We had a change of venue this year. After much time spent aiding the profits of Whitbread at The Brewery in the City, we decamped to Church House behind Westminster Abbey. What a splendid place.

Investing for recovery was the theme although it included two external speakers whose topics were very different. PPML&#39s John Moret brought us up to date with the development of the Sipp market. I remember talking to him at the beginning of this new millennium when he announced that the forecasts of the Sipp Providers&#39 Forum had been met – just – with 50,000 plans taken out and £10bn under management. That was two years ago. The funds under management have doubled since then, despite falling markets, while the number of plans has risen by 40 per cent. Given the way that defined-benefit schemes are disappearing – and with the continuing debate over the compulsion to purchase annuities at 75 – this ideal vehicle for income drawdown has everything going for it at present.

But it seems unlikely that we will get much relief from the Government on compulsory annuity purchase if a speaker at another seminar I attended last week is anything to go by. A representative from the ABI warned IFAs and other financial services professionals that the Treasury remains committed to the concept of collecting tax on pensions while tax relief on contributions remains. Annuities were the most efficient means of converting a pension fund to income, thus ensuring the Inland Revenue gains its pound of flesh. More innovative annuities might be permitted but it was a point of principle and one on which little ground would be given.

As lifting the age at which CPA cuts in is likely only to benefit the better off and could open the way to more creative inheritance tax planning, the Government must be expected to hold firm. Its main concern is with plugging the savings gap at the bottom end of the market. This gap is estimated at £27bn a year – and widening. This is equivalent to £1,400 for each household in this country. To close the gap would mean an uplift in savings in excess of 50 per cent. Unfortunately, it is the less well-off among us that need to save. Try telling a 24-year-old to give up cigarettes and save money into a pension plan and you will receive a frosty answer. I know – I tried. My son decided smoking was preferable and, anyway, concluded that if he continued with this habit a pension might not even be needed.

One answer is to introduce compulsion for retirement savings but this may not play well among traditional Labour supporters. It was interesting to learn at the IFA UK conference in Leeds last week what those IFAs present at the investment question-time panel thought of Government moves in retirement planning. To the surprise of the panel chairman, most had sold stakeholders to their clients. My bet is it is the better-off among their clients taking advantage of the tax breaks rather than those on low earnings buying the concept.

But to return to our investment conference, the second guest speaker was Aubrey Evans, chief executive of estate agents Savills. His was hardly a recovery story. The residential property market has been mightily buoyant. As it happened, he talked principally about commercial property and I was struck by the fact that it had not enjoyed quite the surge in value that our homes have. Yields were good but the pitfalls of investing in commercial property were made plain. Of course, if you could establish a portfolio of suitable size, you should be secure from individual property problems. About £20m or so should do it, he suggested. Well, that is my asset diversification sorted out then.

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