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Just another spanner in the cover works

I attended a seminar last week on the new pension complication rules due to come into force from April and one of the topics covered was the return of pension term assurance.

Apart from the stupid and completely unnecessary restrictions on the maximum permitted sum assured, it appears that neither waiver of premium or terminal-illness covers will be allowed.

This, of course, will add to the complexity of comparing pension term with ordinary term – yet another spanner in the works that no one needs. Needless to say, none of the providers seems ready yet to give any indication as to how their new pension term premium rates are likely to compare with those for ordinary term.

What is it with the Government? First, they (effectively) take away something with which there was nothing wrong in the first place and now, in a tacit admission that so doing was to all intents and purposes a mistake, they give us back an inferior version. Brilliant.

It also seems that it will, after all, be possible for unspent retirement funds to be passed down within the pension domain, on death after the age of 75, to the next generation, provided the beneficiaries are also members of the same family Sipps.

Quite what percentage of the funds in question is going to be plundered by the taxman is something that the Treasury has yet to decide. Unless the rate to be charged is substantially less than the normal rate of 40 per cent for IHT, any effort at estate planning by this route will be pointless.

That aside, a certain (minimum) level of contrib-utions (to be paid by whom?) will need to be made in respect of each and every member of said family Sipps to establish their membership.

This means that regulated advice will need to be provided to all of them individually. That means fact-finds and suitably compliant letters of recom-mendation to each scheme member, does it not?

If the various family members live at opposite ends of the country, this places the IFA in an impossible position unless the client is prepared to fork out substantial fees for each home visit. The IFA will be bound by FSA regulations to document his advice to each scheme member and to record the information on which this has been based but the costs of so doing will be prohibitive.

Just how comprehensive, in this context, will his fact-find need to be? What if there are three sons, each of whom has an entirely different attitude to investment risk from his brothers? What if each of them wants to make differing levels of contributions to the family Sipps? Will the FSA issue regulatory guidelines on this? Or will it be the usual case of regulation after the event?

How much will the IFA need to charge the principal client for jumping through and over all the hoops and hurdles necessary to ensure that the scheme is set up in a compliant manner?

As mentioned above, unless the potential saving in IHT is likely to be substantial, the exercise just will not be worth it. Will it? Once again, the only people likely to be affected by these new regulations are those who already have substantial pension savings. The effect on Mr Ordinary Joe will be minimal and probably negative at that.

What a shambolic and ill thought out mess. Talk about making it up as you go along. I for one, intend to continue to steer well clear of Sipps and I stopped funding my own personal pension years ago.

Julian StevensWDS IFAs,



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