Mercer welcomes DWP consultation on SIPPs

Mercer has welcomed the move by the Department for Work and Pensions (DWP) to begin consultation on draft regulations to allow SIPPs to hold protected rights.

The consultation will be open until the end of February 2008. It proposes to remove the existing restriction preventing SIPPs from holding protected rights allowing individuals greater freedom to choose where to invest their pension savings.

Protected rights funds are pension funds built up from National Insurance (NI) rebates when contracting out of the State Second Pension (S2P). Currently they can only be invested in insured funds, bank deposits or mutual funds such as open ended investment companies (OEICs). The existing restrictions preventing SIPPs from holding protected rights are now considered unnecessary in the light of recent changes which mean that SIPPs are now regulated by the Financial Services Authority (FSA).

According to Roger Breeden, principal at Mercer, "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."