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The Year in life and pensions

The Government’s revolving door policy in relation to pensions ministers got off to an early start in 2008 with Work and Pensions Secretary Peter Hain resigning.

He quit over his failure to declare donations worth £103,000, received during his campaign to become deputy leader of the Labour party.

Former pensions minister and Culture Secretary James Purnell was hailed as the prodigal son by the pensions industry when he was appointed in Hain’s place. Purnell was well regarded by many in the industry in his previous role as pensions minister.

Meanwhile, Prime Minister Gordon Brown decided it wasn’t really the done thing to have a “gold-plated” pension scheme when so many people in the country had little or no private pension, so he agreed to scrap his.

Conservative leader David Cameron jumped on the bandwagon and pledged to end gold-plated pensions for MPs, calling for an end to the “pensions apartheid” that exists between Westminster and private-sector workers earlier this year.

The Personal Accounts Delivery Authority launched it consultation paper on choosing a charging structure for personal accounts at the end of January.

The results, announced in July, were fairly inconclusive and showed that there is no clear consensus from the industry on whether to adopt an annual management charge, a joining fee plus a contribution charge or an AMC plus a contribution charge.

The DWP finally announced in February that it would be launching a study into the impact of means-tested pension benefits on personal accounts. The industry expressed a sigh of relief, however this was only temporary as it emerged that the results of this would not be published until the Pensions Bill had become an Act.

Life offices spent a large part of the year lobbying the Government to change the qualifying test for personal account exemption to prevent widespread levelling down. The DWP did make a couple of concessions – allowing employers to keep their own contribution calculations where they contribute an equivalent or greater sum into a workplace pension than personal accounts, and allowing employers to self-certify that their pension scheme meets the qualifying test for exemption. But the general consensus was that these proposals did not go far enough and would still lead to widespread levelling down, with lower earners losing out.

Friends Provident decided to stop paying initial commission on new group personal pension business which led to a heated debate among life offices. Norwich Union, Aegon, Axa and Scottish Widows were slammed by Royal London and Skandia, among others, for having unprofitable and unsustainable business models.

Friends also made the headlines when Standard Life head of UK retail Trevor Matthews resigned to join Friends Provident as the chief executive.

The Budget in March was fairly dull for pensions but the life industry welcomed clarity surrounding capital gains tax.

Legal & General bought Suffolk Life for £62m in a bid to increase its presence in the Sipp market.

Sad news occurred in April when Hornbuckle Mitchell managing director Neil Marsh died after a two and a half year battle with cancer. tributes flooded in for Marsh, 47, who worked in the industry for over 24 years and was seen as a pioneer of specialist pension provision.

There was good news in May when the European Commission agreed that employees can be auto-enrolled into GPPs when personal accounts are introduced in 2012.

But not so good news when the FSA found that providers were falling short of the mark on Open Market Option standards for annuities. Nearly 40 per cent of their consumer correspondence failed to meet regulatory requirements.

Third-way products continued their slow trickle into the marketplace with Aegon’s Income for Life at-retirement product launching in May.

Norwich Union and Prudential joined Legal & General by offering postcode-rated annuities which industry experts said marked a tipping point in the market trend towards individualised annuities.

More news on personal accounts in June when the Government amended the Pensions Bill to ban employees from encouraging or forcing workers to opt out of personal accounts or other workplace pension schemes.

Aegon director of pensions development Stewart Ritchie OBE retired in July after 36 years with the provider.

Industry commentators expressed concern when the Government’s own figures revealed that people with less than 20 years until retirement in 2012 on salaries of up to £25,000 will see negligible benefits from personal accounts.

Sipp providers were given the green light by the DWP to allow protected rights funds to be invested in Sipps from October.

We had yet another Pensions minister in October in Brown’s Cabinet reshuffle when Mike O’Brien was given the energy brief. Former transport minister Rosie Winterton was installed as pensions minister while Kitty Ussher moved from economic secretary to the Treasury to the DWP to become a parliamentary undersecretary. Pada chairman Paul Myners left his role to take up the position of financial services secretary. Former Pensions Commission member Jeannie Drake took over from Myners on a caretaker basis until a replacement is found.

The ABI said it would bring annuity transfer times down to 30 days under a new initiative between providers and e-commerce standards body Origo.

The turmoil in the markets hit final salary pensions hard with Aon Consulting estimating that trustees could face a £225bn deficit.

The Government helped women and carers out by allowing them to buy an additional six years of voluntary National Insurance Contributions to help boost the state pension.

Chancellor Alistair Darling raised eyebrows in the pre-Budget Report when he decided to freeze the pension lifetime allowance at £1.8m from 2010 to 2015/16.

The Retail Distribution Review must be mentioned, if only for the lack of detail on how the proposals will apply to the corporate pensions market. The FSA says it will be clarified next year.

There were increasing calls from the likes of the ABI, Tisa and Tory shadow pension minister Nigel Waterson for auto-enrolment to existing pension schemes to be implemented before 2012.

And the Tories proposed a solution to means-testing if the party comes to power. Waterson said they would reduce means-testing and boosting the basic state pension to allow people to build up their own savings while reducing reliance on the state.

The year in pensions ended with the news that the FSA is to launch a crackdown on advice around the transfer of personal pensions into Sipps. In its review of post A-day pension switching advice, the regulator says it found evidence of unsuitable advice being given in a “significant proportion of cases”.

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