Money Management articles from March 2003

Money Management archives from March 2003

A matter of life and death; Over the last few years, one of the hot topics in pensions has been the compulsion to purchase an annuity at age 75. Mike Morrison, pensions strategy manager at Winterthur Life explains how the Green Paper means the end of the much-hated rule.
March 1, 2003... There have been court cases, a Private Members Bill in Parliament, questions in the House of Commons, reports, campaigns and pressure groups galore. There have probably been more words written on compulsory annuity purchase at 75 than any other...

INCOME DRAWDOWN RESULTS; Pension funds that were heavily invested in equities during drawdown have collapsed in value. Will Hadfield looks at the results of typical investment strategies and shows how to create an asset mix to produce a given level of income for the minimum amoun.
March 1, 2003... A pension fund in drawdown is a risk product. Those who are now suffering from a decline in their standard of living in retirement after several years of drawdown did not understand the inherent risk involved. In 1995, the legislation...

This is a low; Interest rates have fallen sharply over the last decade, and are unlikely to rise substantially in the future. Bernard Henshall, investment development manager at Winterthur Life, explains why the consequences of this change are rarely understood by those.
March 1, 2003... Having peaked at 15% in 1990, the base rate fell during the 1990s dropping to 3.75% at Februarys meeting of the Monetary Policy Committee. Low inflation has been the holy grail of economic policy over the last 30 years and was only finally...

drawdown vs annuities.
March 1, 2003... The two main methods of providing retirement income under a pension scheme are income drawdown and annuities. Winterthur Lifes pensions strategy manager, Mike Morrison, examines the differences

Simplicity with sophistication; Billy Mackay, pensions brand manager at Skandia, welcomes a simplified pensions arena.
March 1, 2003... The recent proposals to radically change pensions, and move to a single simplified regime, have been warmly received by almost everyone in and around the pensions arena. In this new world we can realistically look forward to a regime that is...

Individual Pensions Actual Results; With stock markets in turmoil and bonus rates falling, there is hardly any good news to be had in this half yearly round up of results. Janet Walford searches for the few gems that are there.
March 1, 2003... What a time to review results! Three SUCCESSIVE years of stock market falls have badly hit unit linked returns with most five year results showing a loss. With profit plans too, for so long the bedrock of many peoples pension arrangements, have...

Pension planning for the poor; Peter Jordan, head of UK marketing at Skandia, studies the data behind the UKs pension problems.
March 1, 2003... During a quiet moment at the end of last year I began to read through the 2001/02 family spending survey. While at first glance you could be excused for wondering why a life company marketing manager would be interested in this, it actually...

MOVING TO A FEE BASIS; The FSA is to proceed with depolarisation. As part of its plans, IFAs will have to offer clients the option to pay by fee. Anna Bawden examines whats involved in moving to fee based advice.
March 1, 2003... Until now, the distribution of financial products to retail investors has been restricted to two types of advisers: tied agents recommending products from just one provider, or IFAs, advising across the whole market. This system of polarisation...

The anatomy of good pensions; A consultancy providing pension support to unions has published a report showing the make up of 272 occupational pensions a work of value to the whole pensions sector, says John Chapman.
March 1, 2003... The report by Union Pension Services (UPS) covers 212 final salary schemes and 60 money purchase schemes of leading UK employers. Details of availability and price are on the UPS website, www.unionpension.co.uk. UPS is directed by the actuary...

Taking Stock; ISAs are not just for equities and are probably better for Government and corporate bonds says former investment banker Russell Taylor.
March 1, 2003... Few investors took up their ISA entitlement last year, and fewer still are expected to do so this year. This could be a mistake. Personal taxes are rising, and interest rates are low and likely to go even lower. A capital and income tax free...

Doing the business; Starting or running a business? One way to secure long term capital is with a mortgage, says John Hancock.
March 1, 2003... The face of employment has changed almost out of recognition over the last 20 years. Gone are the days when people (mostly men) would stay at the same employer for all or most of their lives. Gone, too, almost, are the paternalistic days of the...

CONTAINING THE COST OF CARE.
March 1, 2003... From April, the Government will be making a modest increase in the amount that it pays for nursing care for elderly people but this will still leave many families paying the lions share of the cost. This is often met from the sale of a family...

HAVE STANDARDS BEEN RAISED? What was the impact of last years succession of reviews on the bedrock of the UKs savings industry with profits? Stuart Tragheim, Raising Standards project director, takes a close look.
March 1, 2003... Ask anyone in the UK financial services industry what they remember most about 2002 and the response will always include reviews. From the Tiner review of insurance regulation to the Inland Revenues pensions taxation simplification review, few...

YEAR END PLANNING; Year end planning may consist largely of making ISA and pension contributions but there are plenty of planning opportunities, explains Chris Brum of Clerical Medical.
March 1, 2003... You have even less time than you might realise to take action before the end of the tax year, as 6 April falls on a Sunday this year. You therefore have until Friday 4 April to make sure that last minute opportunities are not missed for want of...

TOP 100 PENSIONS IFAs.
March 1, 2003... The UK pensions market is going through a particularly tough time at the moment. Besieged by regular reports of an industry in crisis, the savings gap and horror stories about tumbling fund values and annuity rates, public confidence in...

ISA winners and losers.
March 1, 2003... Never before have ISA providers faced such a challenge. Markets have halved since their 1999, mania-fuelled peak in what has been one of the most grim periods for equities in memory. To make matters worse, it appears that we are marching...

Up, up and away.
March 1, 2003... Keydata has moved the structured products goal posts. It is now all about upside gearing. Several providers have responded to Keydatas ground breaking Dynamic Growth Plan, which was launched late last year, with similar versions of their...

A rebalancing act.
March 1, 2003... Cash management is boring. Unfortunately for investment advisers, getting it right is critical to maintaining the annuity purchasing power of a pension in income drawdown. Some of the insurance companies that are writing SIPPs draw income...

Interest reserved.
March 1, 2003... Scottish Equitable has launched an interest retained trust. The Reserved Interest Trust is a trust wrapper providing access to the life offices three Dublin-domiciled investment bonds: the Investment Portfolio, the Money Market Portfolio and...

Growth linked to managed funds.
March 1, 2003... As previewed in Octobers Money Management, more and more structured providers are bringing out products based on baskets of funds. This month there is such an offering from Newcastle Building Society. The Guaranteed 5-Star Bond...

Putnam enters the retail fray.
March 1, 2003... Putnam is launching a Dublin domiciled Global High Yield OEIC, as part of its expansion plans in the UK retail market in spring 2003. The fund will invest in 40-60 European and US non-investment grade corporate bonds. Benchmarked...

FPI correction.
March 1, 2003... Last month it was mistakenly reported that the bid/offer spread on Friends Provident Internationals Glanmore Property Fund was 7%. In fact, there is no bid/offer spread when the fund is accessed through the Elite Investment Account or any...

CLOSE ENOUGH.
March 1, 2003... Finding a manager that has posted a positive return in a falling market is impressive. Finding one that has grown an investment made three years ago by more than a third is outstanding. Close Finsbury has done just that. It outsources the...

Latest Craze.
March 1, 2003... Few investment houses are launching new funds this ISA season. And even fewer of them are preparing to sell high-risk equity funds. Discretionary manager GHC is bucking the trend towards property and equity income funds by seeking seed...

LETTER OF THE MONTH: PI insurance.
March 1, 2003... I am prompted to respond, having read your excellent Comment piece in the January issue. I agree with your scepticism concerning FSAs intention to sweep away 14 years of polarisation. I believe it will be a retrograde step so far as both the...

Does size matter?
March 1, 2003... Bravo Mr Katz! A regulatory body like the FSA, with its annual running costs in the hundreds of millions of pounds, will necessarily find sole traders more of a nuisance to deal with than it does firms similar in size to itself. Many clients of...

An expensive luxury.
March 1, 2003... It is crazy how the Financial Services Regulator sets its yearly membership tariff for my Financial Planner. I expected it to be according to how many clients of his each year need advice that the regulator oversees. Amazingly it is actually...

A question of trust.
March 1, 2003... Mr and Mrs Average, with their GBP14,000 car, GBP140,000 home and now GBP1.4m pension fund, will suffer monetarily to a far greater extent from inappropriate financial planning than they ever could through dealing with rogue car dealers and...

Pension spotlight.
March 1, 2003... Your argument in the Pensions Spotlight, January is that someone could be up to 39% better off saving through a pension rather that an ISA, misses a critical point. You have assumed that exactly the full value of the pension fund will be...

Here we go again.
March 1, 2003... Your Comment piece IN January was great and very pertinent. The powers that be seem to have little regard for the consumer or for the people who have provided top quality advice to them. It seems that the big institutions continue to have their...

A suggestion.
March 1, 2003... Your publication and you in particular as editor, have always assiduously defended and campaigned for IFAs throughout all the difficulties that we have had to face over the years. However, one of the most significant difficulties and...

Seeing the future.
March 1, 2003... Thank you so much for publishing the excellent article on Past Performance in your February 2003 issue. I have long felt that investment in trusts actively managed by City houses ought to be the best policy; and that those managed by banks...

Warrants workshops; Free to IFAs.
March 1, 2003... Preparations are in full swing for a series of workshops on covered warrants organised by Money Management in conjunction with TradingLab. The workshops will take place in London, Birmingham and Leeds on 4, 5 and 6 March. They will start at...

Expo on the horizon; Make a date for September.
March 1, 2003... We are pleased to announce details of this years independent financial advisers Expo, sponsored by Money Management, Financial Adviser and Investment Adviser. The event will run over two days in the autumn, taking place at Harrogates...

Mortgage data coming to MM.
March 1, 2003... Coming soon Money Management will be adding mortgage data to its already comprehensive statistical coverage. Final details of what this will include are still being determined, following consultations with IFAs active in the mortgage market....

Next month ...
March 1, 2003... Our blockbusting, award winning, industry standard setting survey of 30 years endowment results will be our main survey. Results this year will be even more interesting as almost every life office has lowered its reversionary and terminal...

Annuity challenge makes headway.
March 1, 2003... The Conservatives are pressing ahead with a Private Members Bill challenging the age 75 annuity purchase rule, despite Money Managements exclusive revelation last month that the Inland Revenue has quietly proposed dropping the requirement...

Would you warrant it! UK fails to warm to new derivatives.
March 1, 2003... Covered warrants, launched in October 2002 with the aim of giving a timely boost to the UK investment arena, are not being sold in the same quantities in the UK as on the continent. The products, which promised investors the opportunity to make...

Hedge funds for retail investors; AIMA ups pressure.
March 1, 2003... Pressure is mounting on the FSA to enable hedge funds to be sold to retail investors. In its response to the FSAs discussion paper, the Alternative Investment Management Association (AIMA), has called for retail funds of hedge funds and...

Oracle system fails to deliver STP.
March 1, 2003... Oracles claim to have produced the first straight through processing (STP) system for IFA giant WIFAS does not do what it says on the tin. The SMART system, which Oracle hopes to adapt for the smaller IFA sector later in the year, cannot...

Goodness gracious me!
March 1, 2003... Life offices will be forced to outsource large numbers of their administration employees to India in 2003 if efforts to computerise their back office systems fail to reduce costs sufficiently. The prediction, which is contained within Spektra...

Assureweb adds annuities and pensions.
March 1, 2003... Misys-owned online quotes engine AssureWeb has taken another step towards catching up with its giant rival the Exchange by providing annuity and personal pension quotes for the first time. AssureWeb had previously only been able to offer quotes...

Pension transfers without G60.
March 1, 2003... IFAs that do not have the G60 pension transfers qualification are now able to offer their clients a full service following O&M Systems decision to accept transfers on its online platform from all advisers. On completion of a transfer, the IFA...

Buy to let uncertainty; House prices begin to fall.
March 1, 2003... Falling yields and a property market slowdown could dampen the buy to let market. Sharpened concern about pension plans, and the availability of cheap buy to let mortgages, has increased the attraction to invest in property in recent...

Menu details unveiled; FSA goes with AIFA.
March 1, 2003... The FSA has opted for Level 3 of the menu system as the replacement for the planned defined payment system. It will compel all intermediaries to disclose average national commission rates across a range of products, as well as the...

The cost of regulation; Life insurers to foot GBP100m bill.
March 1, 2003... The savings industry will be faced with GBP110m in implementation costs, if the FSAs latest consultation paper is adopted. The regulator intends to oblige providers to present customers with a plain English, jargon-free key facts document...

Tax free cash to go up?
March 1, 2003... Contracting out could receive a significant boost if a Government proposal contained in the Pensions Green Paper goes ahead. The proposal is to include protected rights, the rebates received for contracting out of the State second pension,...

Consistent past performance; Former FSA author fails to find performance consistency.
March 1, 2003... Only the top 3.3% of UK equities retail funds show any statistically significant evidence of consistent investment performance. The latest attack on the notion that the top funds outperform their peers over the long term is made in an...

Investment message failing to get through.
March 1, 2003... The biggest obstacle to investment is misunderstanding of the process, according to research by Insight Investment. 39% of survey respondents thought that a lump sum was necessary women held this believe more strongly than men (41% against...

Mortgage advisers get digital certificates.
March 1, 2003... The UKs 15,000 non-regulated financial advisers no longer have to remember scores of passwords to access the extranets of the big product providers. The digital certificate for the financial services industry, Unipass, which has been available...

Safety first; High income bond sales fall.
March 1, 2003... Consumers are abandoning high income bonds for the safety of capital guaranteed products amid spiralling allegations of misselling. Figures from new data provider Arete Consulting show that sales of high income bonds, which guarantee either...

Bond tax breaks under threat; 5% withdrawal facility to go?
March 1, 2003... The Government may undermine its own attempts to close the savings gap by removing the tax breaks on life bonds in the Budget. Currently, up to 5% of the original capital value of a bond may be encashed each year for 20 years with no...

Equity ISAs no failure; Fund management industry fights back.
March 1, 2003... The Investment Management Association (IMA) has denounced as "misguided" a call for the Government to abandon equity ISAs. The attack on the product, from the influential Institute for Public Policy Research (IPPR), came as providers vied...

Pensions in crisis.
March 1, 2003... Pensions Policy Institute (PPI) research indicates that more than one third of future pensioners face being disappointed with their retirement income. The average pensioner today may be better off than yesterdays, with an income of GBP9,500,...

Unnecessary fuss over annuity limit.
March 1, 2003... Scottish Equitable has waded into the debate about the proposed age 75 limit on inheritable annuities. Stewart Ritchie, director of pensions development, has rejected claims by Norwich Union that such a limit would significantly diminish the...

Equity release market up 49%.
March 1, 2003... SHIP, the equity release trade association, has reported that its members saw new business jump 49% in 2002. Mortgage-based equity release business rose 81% from 2001 to stand at GBP651m, while reversion schemes accounted for GBP201m. Total...

Call out for mutual insurer; Industry mulls PI proposals.
March 1, 2003... The financial community has made a plea to insurers to come up with proposals for a PI mutual scheme of the variety suggested by the FSA. Paul Smee, director general of the Association of IFAs (AIFA), welcomed the idea, which was contained...

High stakes; Under attack from all sides.
March 1, 2003... Plans for the stakeholder suite of products were finally announced in a joint consultation document from the Treasury and the DWP, accompanied by Discussion Paper 19 from the FSA. After much lobbying by the industry, the Treasury has...

FSA turns spotlight on property funds; Concerns over property illiquidity prompt FSA inquiry.
March 1, 2003... Fears that collective investments in property may be so illiquid that any potential problem could escalate into a crisis have prompted the FSA to initiate an inquiry into the sector. Providers of SIPPs and SSASs, which both have the power...

Myners review.
March 1, 2003... The two year review of the Myners Investment Principles for occupational pension schemes will begin in March 2003. Initial qualitative research will be conducted until summer. Results will be published and will be followed by a quantitative...

BoS FINED GBP750,000.
March 1, 2003... The Bank of Scotland has been hit with a GBP750,000 fine from the FSA for maladministration of PEPs and ISAs. The FSA found that BoSs failure to administer customers funds properly put 30,000 PEP and ISA investors at risk of losing money and...

Banks pocket rate cut.
March 1, 2003... The UKs leading banks are under fire for only cutting mortgage rates by between 0.1% and 0.16% in response to the Bank of Englands surprise 0.25% rate reduction. At just 3.75%, the base rate now stands at levels not seen since 1955. But Halifax...

Over the top again.
March 1, 2003... Scottish Mutual will return to the with profits market just four months after it closed to new with profits business. The Abbey National-owned insurer is the latest life office to adapt its with profits product range to the changes proposed by...

Lowering standards; Life office consciously underestimates endowment projections.
March 1, 2003... Money Management has discovered that Standard Life is using a formula that needlessly understates endowment projections for people paying off mortgages. Instead of giving current values, (ie assuming that the policy will be continued),...

FSA to regulate investment trusts; Treasury report published.
March 1, 2003... Investment trusts should be brought under the aegis of the FSA, the Treasury Select Committee has proposed. In its third report on split cap investment trusts, the committee concludes that the regulatory gap was a contributing factor to the...

Revenue u-turn.
March 1, 2003... The Inland Revenue has climbed down from its stance on SIPPs and SSASs. The self administered schemes will be able to continue investing in commercial property after all, the Revenue revealed. In the Green Paper, as highlighted by Money...

Equitable appeals.
March 1, 2003... Embattled life insurer Equitable Life has lost a high court negligence claim for GBP2.6bn against former auditor Ernst & Young. The judge rejected the argument that Equitable would have sold its business had it known the true state of the...

COMMENT: Extreme irony.
March 1, 2003... I was uncharacteristically struck dumb recently when someone told me that there is a programme on the television called Extreme ironing. I couldnt believe that anyone could make a programme, much less watch one, that apparently revolves around...