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Personal problems

For the pension world, 2009 should have been a year of significant change, as the Personal Accounts Delivery Authority hit its stride and started to get to grips with the design for the new pension scheme.

Although the year began smoothly, the rollout of personal accounts hit various roadblocks over the following months. Pada continued to consult on the design of the charging structure, investment process and income withdrawal of the scheme and launched the tender process for the administration of the new system.

Four organisations were shortlisted in May but by the end of the year, three had dropped out of the bidding.

The Conservatives cast a shadow over the whole scheme by promising a review if they win next year’s election.

In October, the Government announced it would delay the implementation of personal accounts, meaning staff employed by small companies will not receive a 3 per cent contribution until 2016.

Then in December’s pre-Budget report, the Chancellor announced a further delay to full implementation, allowing employers to postpone increasing their contributions for another year, meaning scheme members would not receive the whole 3 per cent until 2017.

This prompted fresh speculation on the number of employers that would level down their existing pension to take advantage of the delay.

One positive move this year was an effort to increase the awareness of the open market option for annuities. The Association Of British Insurers’ Options’ initiative made some progress in reducing vesting times, and the launch of new industry body Pension Income Choice Association in October helped attract some consumer interest.

The debate over whether IFAs will be able to handle many thousands of small pension pots still rages but Aviva took a big step by referring small cases on to an annuity service with a panel of providers.

Self-invested personal pensions were also in the news. Low interest rates paid by Sipp cash accounts focused attention on charges and led to speculation about consolidation among smaller product providers.

Freedom Sipp, a small provider, closed its doors, leaving the FSA and HM Revenue & Customs with the tricky task of uncoupling its clients and
Although Freedom was wound up over a tax bill, the company had specialised in investing in overseas property and its wind-up raised issues of the suitability of some types of property investment.

IFAs had to deal with the double headache of a Budget and a pre-Budget report that both took from, rather than gave to, pension savers. In April, the Chancellor slapped higher-rate tax restrictions on people earning over £150,000, and then in the PBR he went one step further to restrict relief for people earning over £130,000.

Two more names were added to the long list of pension ministers. James Purnell and Rosie Winterton were in place as Work & Pensions Secretary and minister of state for pensions respectively at the start of 2009. Following the reshuffle in June, the year ended with Yvette Cooper as the ninth Secretary of State and Angela Eagle the 10th pensions minister to hold the posts since Labour came to power in 1997.

With a general election in the first six months of 2010 and the Government facing a huge deficit, pension reform and the cost of pension provision could be set for more changes next year.

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