UNIT TRUSTS and other independent fund managers could benefit from multi-billion pound transfers out of life assurance policies after next April, reports the Daily Telegraph .
In a surprise move, the Government is to allow savers who opted out of the state second pension (S2P) - formerly known as Serps - to switch their funds into self-invested personal pensions (Sipps), says the paper.
Fidelity and New Star welcomed the about-turn yesterday, as did the Investment Management Association.
Life assurance companies manage most of the opted-out "protected rights" plans set up since personal pensions were launched nearly 20 years ago. About 5m people have opted out of S2P and £10bn of National Insurance Contribution rebates were paid into protected rights retirement funds last year. That inflow was more than double the net retail sales achieved by unit trusts and open-ended investment companies last year.
Richard Wastcoat, managing director of Fidelity International, said: "We applaud any move by the Government to broaden the choice of investment fund for those saving for their retirement.
"Widening the scope of Sipps to accept National Insurance rebates would enable workers to direct a significant portion of their long-term savings to the asset management groups that consistently produce the best returns and offer the best value for money."
MEANWHILE, DOOR-to-door loan specialist Provident Financial yesterday became the latest employer to inform staff they needed to increase contributions or face cuts in benefits after a review found its final salary pension scheme was "unaffordable", according to the Guardian.
The company said it paid a quarter of net profits to its pension fund last year and needed to cap future liabilities before they ate further into profits. It told staff they must double their contributions to 14% or leave the scheme. Few employees are asked to pay more than 10% of their salary into an occupational scheme and most pay between 4% and 8%.
The move, which prompted claims the company was in effect closing the fund by the back door, follows similar cost cutting measures by FTSE 100 firms Rentokil and Compass Group.
BRITAIN’S ECONOMY relied heavily on a surge in public investment to shore up growth in the third quarter as rising taxes cut consumers’ spending power and businesses continued to shy away from investing, official data showed yesterday, says the Times.
In detailed national accounts breaking down third-quarter performance, growth was left unrevised at a modest 0.4%, confounding Bank of England hopes of an upgrade.
The crucial services sector did expand a little more vigorously than previously reported, with its third-quarter growth revised up to 0.7%, from 0.6%.
Despite services’ more robust showing, the City gave warning of the driving forces behind recent growth, highlighting reliance on taxpayer-funded investment while private sector activity stayed anaemic.
THE AMOUNT of money flowing into exchange traded funds doubled this year as UK investors became aware of the benefits of alternative trading products, says the Financial Times.
ETFs are quoted securities made up of a basket of stocks mimicking a benchmark, similar to an index-tracking fund. But unlike a tracker, they are bought and sold on an exchange, rather than directly from a fund management company.
They provide a cheaper and more accessible way of trading than mutual funds and unit trusts because they are priced like stocks and traded throughout the day rather than at a fixed point. They also offer investors exposure to sector themes without the risk of buying one or two specific stocks, which could under-perform.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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