View more on these topics

This week in Pensions

Apparently the Egyptian queen Cleopatra was so monumentally peeved about her boyfriend, Antony, dying and the prospect of being ruled by the invading Augustus Caesar she committed suicide by allowing some poisonous asps to bite her.

Of course, that was a few years ago.

This week GE Life has led industry-wide calls for IFAs to continue to advise suitable clients to take out Asps and defy increasing Government pressure.

Fears that the Government will spoil or scrap Asps heightened last week when Treasury Economic Secretary Ed Balls confirmed changes will be included in the next Pre-Budget Report.

The Government says advisers are abusing Asps by making them widely available, as it claims they were designed solely for people with moral or religious objects to annuities.

But GE Life retirement product design manager Ray Chinn says there is absolutely no point in advisers ruling out Asps until the Government confirms the industrys worst fears. This is for the very simple reason that people with Asps can switch to an annuity but people advised to take out annuity are stuck with their choice.

As Hargreaves Lansdown head of pensions research Tom McPhail points out, this poses a very real threat for IFAs. He warns that over cautious advisers could face misselling claims if they advise customers to take out an annuity rather than an Asp and the Government fails to follow through with its warnings.

Chinn’s calls have been branded common sense by a wide range of respected advisers and providers, including Norwich Union, Winterthur Life, Standard Life and Origen.

Let’s hope this united industry front against the Government’s ludicrous treatment of what is an invaluable (and tax beneficial) alternative to annuitisation, will make the desired impression before the Pre-Budget Report.

Elsewhere the ABI has made the rather fortuitous discovery that a centralised NPSS scheme would not be significantly cheaper than an industry-led scheme, made up of competing branded providers.

It says the findings demonstrate the need to base the decision on who runs NPSS on more than just cost.

The new report, conducted by consultancy firm Oxera, rejects the argument that one centralised fund will benefit from greater economies of scale than a number of separate funds.

It says a single centralised default fund would fail to achieve advantages in terms of economies of scale over the default funds of branded providers.

Economies of scale for administration, it argues, are limited beyond 500,000 accounts. Economies of scale on fund management for funds of over 1bn, a scale which it says the average industry default fund would rapidly achieve, are also strictly limited.

The report also says the likely level of marketing expenditure envisaged for Personal Accounts of 2 per cent of revenues, is roughly equivalent to the bidding and other transaction costs for a centralised NPSS model of delivery – with an average of 2.9 per cent of contract value for similar large products.

The report argues that switching between providers is desirable because it creates pressure on providers to reduce costs and improve service. It says, in the absence of financial intermediaries the cost of switching will be small and would only have an impact of up to 5 basis point on consumers.

The dubious track record of previous large public admin IT projects is also raised in the report, which argues this demonstrates a number of risks attached to a centrally administered NPSS scheme.

Of course, this all bodes very well indeed for anyone wanting a NPSS administered by competing, branded providers.


FSA says industry must lead distribution model changes

The FSA has set out its five key priorities for its review of the distribution of retail investments and has called on the industry to take the lead in reforming the market saying it is on the cusp of change. The FSA’s Retail Distribution Review was launched in June 2006 with the objective of identifying […]

Caps in hand

In this article I will conclude my discussions about the use of different asset classes and sectors by highlighting a few of the key variables and factors in the selection of equity funds within a portfolio. Some of these issues are mostly or entirely subjective but, as I started to outline in my last article, others can be scrutinised in a mathematical or objective way.

NU boosts sales as service improves

Norwich Union claims its strong sales figures in the UK in the first nine months are largely down to improved service standards. Parent group Aviva figures show total worldwide sales rose 22 per cent to £22,718m from £18,601m in the same period last year. NU’s UK life and pension business grew by 31 per cent […]

Neptune India: three stocks we’re buying & the one we’re not

By Kunal Desai, Head of Indian Equities The Neptune India Fund’s investment process serves as a key differentiating feature of the portfolio versus its peers, contributing to its significant outperformance under Manager Kunal Desai’s tenure. Focusing on industry disruption, accounting quality, liquidity and corporate governance, Kunal sets out three stocks that he’s buying in the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm