Hi all,
in heart of the bleak mid-winter here’s something to cheer you on the old pension front if you have a contracted out fund.
Following new legislation that came into effect on 1 October 2008 investors can now transfer their protected rights funds into a SIPP (self invested personal pension). Protected Rights funds are made up of national insurance contributions from taxpayers who opted out through The State Earnings Related Pension Scheme (SERPS) or the State Second Pension (S2P).
Previously these funds have been limited in the type of assets they could invest in as self investment was considered to be subject to increased risk. However the FSA introduced a new regime in April 2007 which gave consistent protection across all types of pensions including SIPPS.
It is estimated that there is between £75 and £100 billion currently sitting in these funds and in many cases they are not doing very much at all and their performance is often weak. Quite a few clients I advise have money in very mediocre funds and are therefore are delighted that they can now access different assets such as shares, gilts, unit trusts, investment trusts, insurance company funds as well as commercial property. Clients can have more control over where they invest the money or they can get their IFA or stockbroker to make changes on their behalf. This kind of control is a valuable asset these days in such volatile conditions – as is the ability to act quickly and make changes when required without delay.
A huge proportion of contracted out money is also lying in closed pension funds (closed to new investors) which tend to be very unexciting to say the least. One example is Pearl who have about £75 bn in assets with much of it in Protected Rights.
If you are one of these people it is well worth getting a proper pension transfer analysis done. It’s your pension and your future so it’s important that you get these funds working better for you and more so than ever in our current ‘chilly’ environment.
Until next time…
