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Meeting the minister and OMO developments

I had the pleasure of meeting pensions minister Mike O’Brien yesterday who seems to have taken on his new brief with a great deal of enthusiasm.

Thankfully, he was quite outspoken on several issues and certainly didn’t maintain a dignified silence about Shadow Work and Pensions Secretary Chris Grayling’s comments at the Conservative conference regarding the Government’s treatment of victims of scheme collapses.

You can read more of what he said in next week’s issue of MM.

The pre-Budget report has to get a mention naturally, although it wasn’t too exciting on the pensions front.

The open market option review received mixed reactions ranging from Standard Life calling it a “damp squib” to other providers saying it is a step in the right direction.

The main points are the FSA will be reviewing the speed at which pension providers transfer OMO funds, with action threatened against those who are slowest.

This is welcome news for advisers and consumers who find this a key source of frustration when buying an annuity.

In fact, the Pensions Ombudsman’s annual report for 2006/07 showed that pension transfer business was the second-highest cause of complaints with 158 cases, representing 13.9 per cent of all complaints.

One of the other measures announced was that The Pensions Advisory Service will be setting up a web-based tool to help customers choose the right annuity option for them which will be linked with the FSA’s comparative tables.

Whether these measures will result in a greater awareness of the OMO among consumers remains to be seen.

Providers were annoyed that the Government decided not to relax the tax rules around variable annuities which would have allowed these undoubtedly important products to be developed further.

The Treasury says it will not change tax legislation because this would add complexity and potentially benefit only a small number of consumers with large pension savings.

But Aegon head of pensions development Rachel Vahey says this is not true because it could benefit many consumers with medium-sized pensions and Winterthur Life pension strategy manager Mike Morrison calls it a missed opportunity.

Aegon intends to lobby the Treasury to rethink this policy.

Another move – which came as no surprise – was that HM Revenue & Customs closed a loophole which allowed pensions funds to be passed on tax-free at death when held in small self-administered schemes run as family schemes.

Any funds passed on will now face unauthorised payment and IHT charges, bringing the total potential tax charge to 82 per cent, in line with the treatment of alternatively secured pensions.

In non-Budget news this week, AJ Bell is setting up a deal to offer its SippCentre customers access to the Cofunds platform.

As part of the link-up, Cofunds will bankroll SippCentre’s £120 Sipp establishment fee if clients hold at least £25,000 of their portfolio on the platform.

AJ Bell commercial director Fergus Lyons says this is a natural progression because there was a lot of demand from advisers who wanted to use Cofunds.

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