A-Day has been hailed as an historic opportunity for fund mangers by the head of the Investment Management Association (IMA) this morning.
Speaking at the Financial Services Authority’s Asset Management Conference, Richard Saunders, IMA chief executive, says A-Day will provide the investment industry with the opportunity to introduce “greater competition, new products and real benefits for consumers”.
Saunders says it is widely acknowledged that pension provision in the future is increasingly going to be in the form of personal pensions and occupational defined contribution schemes, adding fund mangers could have an increasingly important role to play in this market as a result.
He has also called into question the perception that life assurance is the natural route for pensions provision saying the accumulation phase in a personal pension is clearly a savings contract and not a life insurance one. Saunders blames the perception on what he calls ”an historically unlevel regulatory playing field”, particularly with reference to tax rules and habit.
While the first of these is being removed next year with the introduction of pensions simplification on 6 April, the second will need removing by the investment industry, Saunders says.
He calls the eligibility of housing and other assets for investment in personal pensions post A-Day a “sideshow” saying: “It may be that some individuals at the margin will choose to put such assets in their pension schemes. But that will simply reduce the scope for including other and more appropriate assets for investments for retirement - such as funds.
The IMA will be presenting the Turner Commission on pensions industry reform with a detailed paper outlining its response to a request for ideas on how to deliver low cost individual retirement accounts within the state system.
The IMA will propose a public-private partnership, which it says could deliver the benefits of individual investment at significantly lower cost. The paper builds on a consultation document entitled Investing in Savers produced by the IMA last autumn in which it called for a single tax regime of 15% for retail investors in place of the current seven tax regimes for funds.
Saunders has also drawn attention to the growth of Dublin and Luxembourg as alternative fund centres to London, largely because of UK tax rules. He argues that if the rules had not led institutional money market funds and exchange-traded funds offshore, then the UK fund industry would be 50% bigger than it is today.
And in a warning to the government he says the current antiquated approach to taxing trading and investment is unable to cope with modern asset management techniques, saying reform of these rules would be: “the single biggest contribution the Treasury could make to fostering the UK as a global asset management centre."
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 Matthew West on 020 7484 9893 or email [email protected].IFAonline
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