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Meltdown averted but problems are still in the pipeline

Predictions of an admin meltdown after A-Day have pro- ven overblown but there are plenty of other problems around the corner, warned panellists at the Money Marketing Sipp round table.

Specialist pension IFA Richard Jacobs admitted his predictions of an A-Day meltdown, with providers buckling under increased volumes of business, have not happened.

He said providers have coped relatively well on a “raw admin” level and suggested that sev- eral providers have avoided potential admin problems by pulling out of some markets.

But he warned IFAs to expect further headaches, highlighting restrictions on alternat- ively secured pensions and the complexity of death benefit arrangements on different schemes as being of particular concern. He said: “There are a lot of nasties that will appear over the next few months as we get to grips with the twists and turns of simplification. I have no doubt this legislation is more complex than expected.”

Hargreaves Lansdown head of pensions research Tom McPhail compared A-Day with the Millenium Bug and said there have been no disasters so far. But he said: “The principle of simplification is not in any way supported by the underlying philosophy that pervades HM Revenue & Customs. It is striking that 90 per cent of the rules are very simple and there is a lot of good stuff in there.

“But that extra 10 per cent adds 300 per cent on the paperwork. Tax-free cash recycling is a very good example of this, as is dealing with shares in Sipps. The industry is still feeling its way.”

Worldwide Financial Planning IFA Nick McBreen said that A-Day has added comp- lexity to once simple proc- esses such as buying an annuity on the open market.

He said: “There is also now a raft of additional questions with things such as the life- time allowance coming in instead of yearly limits, which is pushing more responsib- ility towards the adviser and could be discouraging people from saving.”

McBreen also warned that clients ploughing money into property funds in Sipps will be the next scandal to hit the industry. He said: “I can quite safely say this is the next scandal waiting to happen as people are advised to pile into exposure to property and told this is the answer to their prayers.”

McPhail commented: “Property is certainly an overvalued asset class.”

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