Money Management articles from June 2003

Money Management archives from June 2003

Special ops; Most transactions of equity-release plans take place without the involvement of an IFA. This will have to change because only qualified intermediaries have the expertise to advise on the implications of inheritance tax planning and State benefits, says Ho.
June 1, 2003... No other area of financial services is growing as rapidly as the equity release sector. The rise in business volumes in the market is spectacular. The 12 members of Safe Home Income Plans (SHIP), the consumer protection body for the equity...

Why it will be different this time; The demand for equity-release schemes continues to be suppressed by memories of the products that caught homeowners in a negative equity trap in the late 1980s. Will Hadfield reveals why these problems will not happen again.
June 1, 2003... The homes of retirees are one of the greatest pools of privately held wealth in the UK. For providers of equity-release schemes, homes owned by the elderly with no outstanding mortgage represent the only serious answer to the pensions...

Equity release schemes explained; This year equity release business will burst through the GBP1bn barrier. With the population ageing rapidly and baby boomers less than 10 years to retirement, this market has to grow. Will Hadfield surveys the various products available for releasing capi.
June 1, 2003... The equity-release market has a lot of growing up to do. It is being lauded as the only serious answer to the emerging pensions crisis. Yet most schemes are unregulated, there is little understanding of best practice among advisers and...

Tax and all that; Raising money from a home, whether to provide capital or income, has implications for both tax and benefits, says Will Hadfield.
June 1, 2003... Reversions have a potentially enormous appeal in inheritance tax planning. But it is worth remembering that house prices have increased at a faster rate than the nil-rate band in most of the last five years. Inheritance tax planning does not...

Legal necessities; Independent legal advice during the arrangement of an equity-release scheme will help ensure that the prospective planholder?s best interests are served. Jon King, director of equity release at Hodge Equity Release, looks at what solicitors need to do to.
June 1, 2003... The role of legal advisers in the equity release sector is vital to ensure that confidence in the industry is maintained. Anyone considering such a scheme would be foolish to undertake such a transaction without first receiving financial advice...

EQUITY RELEASE VS PENSIONS.
June 1, 2003... Equity release can provide tax free lump sums, income or a combination of both. Anna Bawden compares equity-release schemes with income drawdown and annuities.

Best practice; When combined with savings, the current rising house prices are creating inheritance tax liabilities for more than just the super rich. The use of trusts for such clients is a growing market. Adrienne Stewart, marketing communications manager (investment.
June 1, 2003... When the subject of IHT is broached, ?That?s not an issue for me? is likely to be the standard response from most clients. However perhaps if we were to ask the following simple question, it may not be the million pound winning question but it...

Back to basics; The key to understanding trusts is to get to grips with the core basis on which all the different types operate, says Mark Battersby.
June 1, 2003... Getting right down to basics for starters, the person who puts assets such as money, stocks and shares, or property into a trust is caller a settlor; it then requires two or more individuals who act as trustees. This is done on the clear legal...

Investments to trust; Trusts come in many guises and can be written to achieve a host of financial objectives. It is wrong to assume that they are only for the wealthy as even modest sums can be sheltered from the taxman, says Mark Battersby.
June 1, 2003... ?Trust in me!? That famous Walt Disney moment in ?Jungle Book? springs inappropriately to mind when casting an eye over the wide range of trust deeds available in the market aimed at helping with tax planning. The combination of legal and...

Inheritance tax planning; This is the winning entry for the 2002 Money Management financial planner of the year awards in the inheritance tax category, submitted by Brian McLean of Wentworth Rose in June 2002.
June 1, 2003... The case study looks at the estate planning requirements of Marti and Paul Johnson, aged 72 and 76 respectively, and their three children Joanne, 40, Taylor, 37 and Bentley, 34. Their total assets are shown in Table 1. Current situation...

A KEY TOOL FOR PENSIONS; Anyone wanting to transfer from an occupational or personal pension needs to know how much the accumulated funds are worth. TVAS are meant to do just that. But do they work? asks John Chapman.
June 1, 2003... Transfer value analysis systems have given respectability to transfers. Now transfers have roles to play in the growing shift away from defined benefit schemes, in moving savers out of old high charge pension plans, and even in ending the 1%...

Would shaking up tax reliefs solve the crisis? The UK pensions situation is now a crisis says John Chapman. What can be done to solve this national dilemma?
June 1, 2003... The Government is simplifying the tax regime for pensions. It could also redirect tax relief towards low/middle income groups and away from higher rate taxpayers. The annual savings gap of GBP27bn, may be now GBP40bn, identified by Oliver,...

Taking Stock; IFAs can prosper if they add investment common-sense to their pension fund expertise, says former investment banker Russell Taylor.
June 1, 2003... Jane Austen?s Mrs Eliza Bennet is the prototypical airhead. Yet, as Guy Monson argues in a research note from Sarasin Investment Management, this mother of the heroines of ?Pride and prejudice? could have been a successful investment manager....

Focus on regulation; The mortgage industry is facing a host of new regulations but what will it mean for IFAs? Mark Battersby reveals the practical implications.
June 1, 2003... There is one consultation process after another at the moment. Not only are mortgage advisers gearing for the new regulatory framework in October 2004, there is the suggestion of possible changes to the type of product that they offer to...

LIFE AFTER WITH PROFITS; Continuing assaults on the with profits concept has led to calls to replace the once popular product with something more transparent. Nicole Pedersen-McKinnon looks at the modern alternatives.
June 1, 2003... Investor confidence has been well and truly shaken by the prolonged and sustained beating that equities has endured in the last few years. Gone is the unswerving belief in the invincibility of the market. And long gone is the belief in the...

STAKEHOLDER - TWO YEARS ON; Two years on from the much trumpeted launch, stakeholder has failed to revolutionise the UK pensions market. Falling stock markets have made the situation worse but, as Jon Cudby finds, when you take tax relief into account there are some winners.
June 1, 2003... Stakeholder pensions have been available for two years, but now the sheepdog led fanfare that heralded their arrival has subsided, enthusiasm for the new schemes has become muted to say the least. The product was designed to be the first...

Budget summary; There were sighs of relief across the personal finance industry that the 5% withdrawal facility from single premium bonds has been left almost unscathed. But there was little else to cheer in Brown?s latest Budget, finds Anna Bawden.
June 1, 2003... For many in the financial services industry, the Budget did little to stimulate savings, let alone reduce the savings gap. In fact, there was little of note in Gordon Brown?s proposals to cheer providers and intermediaries, bar the child trust...

LETTER OF THE MONTH: PI insurance.
June 1, 2003... Have just read your comment in the April issue of Money Management ? couldn?t agree with you more. My PI renewal is due in May, I have been provisionally advised that there will be no problem in renewing, but who knows and at what cost? ...

No laughing matter.
June 1, 2003... Sandler and Davies are sitting in a coffee shop. A financial journalist spots them and asks, ?What are you guys doing in here?? Sandler says, ?We?re planning the latest campaign against the financial services sector. We?re going to put...

Pensions spotlight.
June 1, 2003... As a layman, I was surprised to see in John Chapman?s Pensions spotlight, in April, that speakers at the 26 February City forum on the pensions crisis stated that between 5 and 6.5% of the UK?s GDP was spent on pensions. According to DWP...

Charging confusion.
June 1, 2003... We were pleased that Money Management covered the launch of our new collective investment scheme in the May issue product review. However, we are concerned that a misunderstanding has led to the way that the charges are presented in the article...

More PI problems.
June 1, 2003... I am writing in relation to your excellent comment piece in the April edition. Having spent a month of my life renegotiating PI cover for my last company at the end of 2002, and this with the help of a very able and supportive PI broker, I can...

Financial Jiminy Cricket.
June 1, 2003... I disagree with Debbie Harrison?s assertion, that ?pure? financial planning necessarily involves a written recommendation from the practitioners, because their role is using professional skills primarily for impartial analysis (page 49,...

News in brief.
June 1, 2003... ? Slowing down The rush to launch electronic versions of existing products slowed in 2002, according to figures produced by Focus Solutions. The number of products that could be bought entirely online grew from 34 in 2001 to just 39 in...

Covered warrants catching on; Market turnover surges ahead.
June 1, 2003... Nearly seven months since the opening of the London Stock Exchange?s covered warrant market in October last year, volumes are beginning to increase as investors become aware of their potential to improve portfolio returns through leveraged...

With profits endowment correction.
June 1, 2003... Due to problems accessing data, CIS supplied us with 2001?s asset allocation for Table 11 of the with profits endowment survey. The figures should have read: fixed interest 34%, property 12%, UK equities 40%, overseas equities 7%, other 7%. ...

No one takes liability; PI furore rumbles on.
June 1, 2003... The Association of Independent Financial Advisers (AIFA) has used its response to CP169 to call for the FSA to forge closer links with professional indemnity insurers. The response calls for a ?greater understanding? between the two parties....

Cuts like a life; Free asset ratios go through the floor.
June 1, 2003... UK life offices could be flirting with insolvency according to recent research from Nottingham University Business School. The study, which recorded the free asset ratios of the country?s 20 biggest with profits funds, revealed plummeting...

Past performance in advertising; FSA tightens rules.
June 1, 2003... Within a year from now, if the FSA has its way, advertisers will have to include extra information in their copy regarding past performance on a basis laid down by the FSA. 18 months ago the FSA set up a task force (of which the editor of...

MM awards 2003; That time again!
June 1, 2003... Preparations are already under way for the personal finance awards extravaganza of the year. We are delighted to announce that Money Management will be hosting the eighth annual Financial Planner of the Year Awards at the Dorchester in London...

Revenue loses trust case; Buy now while stocks last.
June 1, 2003... Clerical Medical has struck a blow for tax avoidance with a third defeat of the Inland Revenue regarding its Family Wealth Trust. The life interest trust circumvents the gift with reservation rules to shelter a principle private residence...

Fund frenzy; FSA overhauls CIS regulation.
June 1, 2003... Retail funds will be able to charge performance fees and invest in property, money market, funds of funds and futures and options, under proposals from the FSA. The regulator has published a consultation paper on new rules for investing in...

Best and worst mortgages.
June 1, 2003... House buyers can save a staggering GBP5,834 over five years in terms of the true cost of a mortgage by picking the best lender. The true cost over five years of a GBP100,000 loan from the Woolwich, with a rate fixed until July 2005, is...

Situation critical for Prudential; Insurer faces hefty compensation bill.
June 1, 2003... Prudential will pay out millions of pounds to compensate for the thousands of critical illness applications that had to be rebroked following retrospective premium hikes. The sudden rise occurred due to inadequate risk monitoring, which...

FSA denigrates Select Committee report.
June 1, 2003... The FSA will not conduct an industry wide investigation into splits, despite calls to do so from the Treasury Select Committee. In its response to the committee?s February 2003 report, the regulator said that it felt a targeted...

Terminal bonuses under threat; But reserves are not ?depleted?
June 1, 2003... Anyone seizing on Standard Life?s recent decision to keep bonus rates on hold as the beginning of the end to with profits? woes is sorely mistaken. Ian Maidens, principal at Tillinghast-Towers Perrin, says that, while life offices are now...

Derivative drama; Insurers in spotlight.
June 1, 2003... A furore has erupted over the safety of a derivative contract increasingly used by life offices. Credit derivatives allow financial companies to buy and sell risk in what is essentially a diversification bid. The British Bankers?...

Reversal of fortunes.
June 1, 2003... 34 unit trusts in the popular UK All Companies sector have gained 10% or more in just one month. Riding the wave of renewed market confidence, in excess of 20% of funds in the sector have also posted returns greater than the FTSE 100....

COMMENT: False friends.
June 1, 2003... I read a comment in one of the national dailies recently (or maybe rant would be more accurate) on the responses from the personal fiance industry to the consultation paper on proposed specifications for the Sandler suite of stakeholder...

Catering for every risk profile.
June 1, 2003... NS&I has hit on a winner. Its first four guaranteed equity bond (GEB) issues have raised in excess of GBP300m. And issue five has been launched less than a month after issue four due to heavy demand. The five year product will pay all of...

Private bank accounts become less private.
June 1, 2003... Butterfield Private Bank has launched a new account aimed at high net worth individuals, which enables advisers to have more involvement with their clients? uninvested money. The account has a minimum opening balance of GBP10,000. Interest...

Planning for the future.
June 1, 2003... Homeowners? Friendly Society has launched a Sandler-friendly child savings plan. Available for children aged 0-15 at outset, the plan can be invested in a choice of two equity funds or a deposit account. The UK Equity Index Exempt Fund...

SCOTTISH LIFE ENTERS INDIVIDUAL STAKEHOLDER ARENA.
June 1, 2003... Scottish Life has unveiled a new range of pension products, named Individual, available only through IFAs. The range includes personal pensions, executive pensions, stakeholder-compliant plans and S32 buyout plans. The pensions can invest...

Style with substance; Three new lifestyle funds.
June 1, 2003... Fidelity is claiming another first. After being the first company to launch a fund of funds and the first company to set up a fund supermarket, the world?s largest independent asset manager claims to be the first group to run lifestyle...