Iain AndersonThe Government’s long-awaited welfare reform proposals represent the determination of Tony Blair to leave a domestic legacy.But the mood of the Parliamentary Labour Party and the reaction by many Old Labour MPs to some of the reforms shows clearly that this may be another policy battle for the Prime Minister. Tony Blair has said there are too many obstacles in the way of claimants from being able to return to work. He believes the “vast majority” of incapacity benefit claimants expect to be able to return to work quickly and considers there are “perverse incentives” which encourage people to stay on the benefit which currently becomes more valuable over time but can be cut back if claimants take on training or even voluntary work. Blair is determined “to make work pay” and the proposed reforms are a part of that approach. The Green Paper had originally been set to be published in November last year but the resignation of Work and Pensions Secretary David Blunkett scuppered that timetable. The new Secretary of State John Hutton, characterised by many commentators as a loyal Blairite, was keen to be able to digest the welfare proposals as well as having time to deal with the output from the Turner Commission. That meant a delay of around two months to the publication of the Green Paper which left the Westminster community to speculate on its contents. The Government’s ambition is a heady one – to reduce the numbers of incapacity benefit claimants from its current level of 2.7 million by around one million over the next 10 years. Much of this will be achievable as new claimants will automatically be moved on to the new benefit regime – which will be entitled Employment and Support Allowance and not Incapacity Benefit. The new level of benefit to replace is planned to be effective from 2008 and will have three levels of payment depending on the categorisation of each claimant’s needs. The carrot and stick are definitely in place in this new regime. There will be sanctions for those deemed capable for a return to work and who do not attend work-focused interviews, assessments and then draw up action plans towards further rehabilitation or a planned return to the workplace. Launching the Green Paper, Hutton said: “Our plans will redefine the role of the welfare state. The fundamental emphasis will be on what people can do, not what they cannot. Essentially, we want to return to fundamental principles where the welfare state is able to respond to people’s abilities and help them into the workplace, not one that condemns them to a life on benefits.” It seems that the whole focus of the Green Paper is attempting a change of emphasis towards what people have the capacity to do, rather than judging people by their condition/ illness/sickness. In 2004, the Government established its Pathways to Work pilots joining up health and welfare services in seven pilot areas across the country. The Government now plans to spend 360m extending the scope of the Pathways’ work to become a nationwide scheme. Sensing possible Old Labour concerns, the Government has been careful to ensure the reforms will only apply gradually to existing claimants as resources and capacity become available. In other moves, it seems that statutory sick pay is to be made simpler for employers and SMEs, which are difficult to reach in terms of this agenda, will get specific Government support to manage their sickness absence. The real opportunity which the debate on welfare opens up is a wider policy dialogue on the delivery of protection which needs significant input from providers and insurers which are involved in active intervention and vocational rehabilitation on the right model for the delivery of many of these services on a national scale. The UK’s biggest income protection insurer UnumProvident was one of the first to welcome the moves towards rehab in the Green Paper. Unum Provident corporate services director Joanne Hindle says: “We warmly welcome the 360m investment in a national roll-out of the Pathways to Work scheme, which, in pilot, has been an undoubted success, demonstrating that it is possible for many claiming incapacity benefit to get jobs with the right help and support, including early intervention and rehabilitation assistance. Our own rehabilitation model has consistently shown that early and proactive intervention is the key to getting people back to work, and more ideally, avoiding long periods of sickness absence in the first place.” The initial reaction to the proposed reforms from the Conservatives and the Liberal Democrats has been rather supportive of the approach. In particular, it looks as if the Cameron-led Conservative Party will look to continue to position itself right beside this Blairite agenda. So it seems the Green Paper will raise the debate on protection issues firmly on to the agenda for the next few months. There really is an opportunity for the industry to engage on the issues of rehabilitation and the wider workplace benefits structure in the future. It is thought that the Government wants to get the benefit reforms into a Welfare Bill and into Parliament before the end of the year. But this may only be a hope with backbench rebellions on the cards on many issues – this may be an ambitious timetable. Increased regulation, depolarisation and better informed consumers mean advisers’ lives have changed significantly. Much of this is arguably for the better as far as consumers are concerned but the average adviser faces reduced business levels, higher costs and eroded product margins. As a result, they are looking for ways to replace lost income and an obvious way is to expand their range of services they offer. Many are looking at the burgeon-ing IHT marketplace and introducing a range of complimentary estate planning services. Estate planning services have been around for many years and is becoming a viable and long-term market with advisers are increasingly interested in it. Every time an adviser does a fact-find, they ask the client if they have a valid will but 68 per cent of UK adults still do not have one. What does the adviser do? Not much. They simply point the client to their solicitor. Roll on to the 12-month review and the same question is asked and the same reply uttered. If this were a normal investment case of 275,000, would the adviser send the client down the road to a rival? An increasing number of advisers are latching on to the idea of writing wills for their clients or joining up with a local will-writer who will do it on their behalf. Others establish a general link to a solicitor on the understanding that they will refer business to them and this will be reciprocated. Good work if you can get it but how many can say they have had plenty of referrals from a solicitor? There are probably more advisers who have lost business to solicitors than have a thriving, mutually bene-ficial arrangement. The will can generate income today, trail income through storage, a share in probate fees and may even allow you to become the adviser to the discretionary trust you put into it for IHT mitigation purposes. Forget the potential income for a second. What about client service? If 68 per cent of adults do not have a will, aren’t they doing them a disservice by not being in a position to arrange it for them? At some point, compliance will insist that you go slightly further than just the disclaimer n the client recommen- dation letter and see the job through. What about clients who have an IHT liability? For about 600, you can remove an IHT bill of 110,000. Where else can you achieve value for money on that scale? Today, by using an IOU discretionary will trust, there is no longer the need to earmark funds in a bond for IHT planning. Writing someone’s will is one of the easiest methods of gathering referrals. Just think of the witnesses required, guardians, beneficiaries and executors. Most will recognise that they also need a will. Ringfencing the client base is a very important business consideration for many advisers. Having their own will writing and legal services business allows advisers to offer a real one-stop shop for clients. Branching out into estate planning can allow them to build embedded value into their firm, providing a lucrative retirement pot if they ever sell the firm. Will writing can also be used by an adviser as a way of managing their exit from the business. Some will writing firms have a proposition which guar-antees a future price for the will-writing business written. Some of the figures being quoted run to millions of pounds for bigger businesses with their own salesforce but a reasonable adviser practice may also be in a position to walk away with a sizeable buyout cheque. Advisers have a great deal of choice when it comes to getting involved, from handing leads to a non-competitive third party to running the business yourself: l Hand off – pass leads to a trusted local specialist will writer who will contact the client and do the job on your behalf (about 10 per cent commission to be earned). l Take instructions – be trained by a reputable company/local agent to take simple (and sometimes complex) will instructions on your own behalf. Pass these instructions to a company which will produce the document on your behalf. (Around 30 per cent commission to be earned). l Run the business yourself via affiliate/ franchise schemes – take control of the instruction-taking and production process in house (profit of around 75 per cent-plus) usually in conjunction with a software package and legal support. We have a solution which enhances a practice by providing income today, ongoing trail income, potential income from probate together with the opportunity to reinvest funds on death – not to mention a way to increase the overall embedded value of your business. Add to this the ability to improve client acqui- sition as well as reinforce client retention via a more holistic offering and estate planning starts to seem strangely compelling and all this starts with asking the simple question – do you have a will?
One of the key industry issues is consumers getting advice when arranging protection. Money Marketing’s No Advice No Protection campaign has made it clear that advice is an essential part of the process.
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Lord Turner’s solution to the pensions crisis is half-finished and poorly costed
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Following George Osborne’s delivery of his sixth Budget as chancellor and the last of this current parliament, we have provided a brief overview of the initiatives put forward in his statement, focusing on the topics that have an impact upon the pensions landscape, savings, personal taxation and businesses.
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