Welcome for Sipp liberation

The DWP said the regulations are now considered unnecessary particularly in the light of recent changes which mean Sipps are regulated by the FSA.

The consultation on draft regulations which will allow Sipps to hold protected rights will run until 29 February 2008.

Minister for pensions reform Mike O’Brien says: “This proposed change will give people more freedom to choose where they invest their pension savings. It will remove a restriction on Sipp schemes which is no longer necessary and make it easier to transfer funds between schemes”

At present, protected rights must be invested in insured funds, bank deposits or mutual funds such as Oeics. Some insurers get around the self-investment restrictions by creating a member-directed insured fund. However, these changes will allow complete freedom to invest directly in asset classes like shares and commercial property.

The Government is still considering whether the requirement for survivor’s benefits to be provided from protected rights should be retained. Currently, those who are married or in a civil partnership are required to buy a 50 per cent spouse’s pension with their protected rights pot.

Roger Breeden, principal at Mercer says: “This is a step in the right direction. We support any move that encourages people and advisers to take a more active role in reviewing their pensions. It will be easier to consolidate investments and take advantage of new trading platforms. Many protected rights funds are held in old style investments, such as with profits funds. This should be the trigger for people to review their current investments.” “The difficulty for employees will be to get the right advice and guidance. Employers can play their part by ensuring employees get the right support.

Workplace education is becoming an increasingly popular benefit offered to employees.”

Andrew Tully, marketing technical manager at Standard Life says: ” Much of the money currently locked up in protected rights, estimated to be between 75 billion and 100 billion, will make its way into Sipps as people want the flexibility and choice to invest their pension pot where they wish.

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