Protected Rights now being accepted in to SIPPs would be the just reason to be cheerful.
The change in legislation from 1st October 2008 to allow self investment of protected rights pension funds has been widely welcomed.
Estimates seem to vary wildly as to the potential size of this market but the figure of £100 billion seems to be appearing more often than not. If only 5% of this would be suitable for transfer to a SIPP then that is £5 billion new money into SIPPs. No wonder the SIPP providers are happy.
Some contracted out plans are still receiving rebates - apparently personal pensions receive rebates of £3 billion a year - however while many SIPPs can now receive protected rights transfer not many can receive ongoing rebates, so you will need to consider the wisdom of continuing to receive rebates and not transferring or stopping the rebates and possibly transferring. Given the complexities of advice in this area I would seek guidance from your own compliance department or other experts.
The second cautionary note focuses around the drawing of protected rights benefits through income drawdown. In a recent letter Hornbuckle Mitchell informed us that "the Department of Work and Pensions (DWP) have stated that a SIPP can hold protected rights and non-protected rights, however where benefits have already been taken from the protected rights fund, then they must also be taken from the non-protected rights fund. This is known as 'Proportionality' and ensures that the protected rights fund is not depleted ahead of non-protected rights."
This would seem to suggest that where benefits have not been taken from the protected rights fund and the fund is then transferred in to a SIPP then proportionality would not apply at that time.
However if benefits are already being taken from the protected rights fund then proportionality would apply on transfer meaning that benefits from the non-protected rights fund would need to be taken.
£100 billion of existing pension plans needing advice - reason to be cheerful 1.
Value of Advice
I believe that the financial advisers are well placed to prosper from the current market turmoil. I base this solely on anecdotal evidence of my own experience and those of my colleagues at Park Row.
While business is difficult at present there are some bright spots. I can say that personally I had the quietest tax year end for years in January - April 2008, and that trend continued for most of the summer. But then things started to turn. I found that the level of enquiries had risen, mainly as a result of new referrals.
Why has this happened? I honestly believe that it was because I made contact and continued to stay in contact with my existing clients during this difficult time. I tried to explain what was happening and what might happen in the future, and importantly how this might affect their plans and aspirations for the future.
These clients then tell their friends and they want to speak to you. The oldest and best client referral scheme in the business.
One of my colleagues who follows a similar strategy has been talking about the historic lows the markets have reached. Despite the continuing turmoil on the markets he has had one of the largest inflow of new investments that he can remember. He has spread the message that for medium - long term equity backed investments now could be a very good time to move in to the markets. The client needs to be brave - but you can tell them they're in good company (Warren Buffet and Anthony Bolton both famously starting to move back in to the markets).
Public seeking and valuing good advice more than ever - reason to be cheerful 2.
The markets can't get any worse - can they?
Summer, Buddy Holly, the working folly
Good golly Miss Molly and boats
Hammersmith Palais, the Bolshoi Ballet
Jump back in the alley and nanny goats
Reasons to be cheerful part 3. (with apologies and thanks to Ian Dury).
More than £167,000 raised
Beware ‘temporary’ vulnerability
Celtic WM and Active Wealth