Although all registered pension schemes, including SIPPs, will be able to hold protected rights from October, administrators will still need to track protected rights separately from other rights until at least 2012.
The failure of the DWP to address this issue and simplify the process now has been described as an “administrative nightmare” and a “nuisance”.
Steve Latto, pensions development manager at Alliance Trust Savings, says: “[It is] frustrating that pensions administrators will still need to track protected rights separately.
“We are aware that the Government is looking to simplify the position from 2012 but would encourage simplification as soon as reasonably practicable.”
John Moret, director of sales and marketing at Suffolk Life, adds: “As it stands you will still need to keep the two pots separate which, for investment managers and others, is a nuisance”.
Rachel Vahey, head of pensions development at AEGON Scottish Equitable, describes the DWP’s failure to act on this issue as “disappointing” and urged the Government to act now “rather than wait until 2012”.
“Removing the restriction to provide a spouse's pension would simplify pensions greatly and mean people could use all their pension pot to buy the right type of annuity to suit their retirement income needs,” Vahey says.
Meanwhile John Lawson, head of pensions policy at Standard Life, says the news could be “another nail in the coffin” for SSAS schemes.
“Some people, especially high earners transferring from a defined benefit scheme may have £250,000 or more in protected rights,” he says. “Even people who contracted out via a standard personal pension could have a protected rights pot of as much as £100,000.
“Telling them that they can't self-invest it or that they have to take out a SIPP as well as a SSAS isn't a viable proposition.”
But SIPP and SSAS provider A J Bell only had praise for the move by the DWP.
“There has been significant demand for increased investment flexibility on protected rights,” says marketing director Billy Mackay.
“Enquiries suggest the average protected rights amount is £30,000. We are also seeing clear evidence that clients are consolidating this with their existing non-protected rights fund with an average extra amount of £170,000.
“Added choice and increased investment flexibility can only be good for consumers.”
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Advisers and providers gathered at the Grand Connaught Rooms in London on 20 November to celebrate the ingenuity and the graft displayed in the protected product arena throughout the last 12 months. These awards are growing in popularity every year, and our congratulations go to the winners and highly commended.
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