Sipps to be hit by new way of valuing shareholdings by Finance News Bulletin

Published: 15/01/07

All occasions are London occasion Search News in the FTcom siteSearchSearch Quotes in the FTcom siteQuotes Your moneyBreadcrumb follow navigation:FT house > Your moneyEDITOR’S CHOICEWatchdog says companies understate obligationsBT pension fund in fundamental shake-upHermes sets a benchmark for UK pension fundsFSA tells ministers it will be handicapped by too many responsibilitiesFSA faces official review of its recordLATEST YOUR MONEY STORIESWorkers who contract out to take pleasure in greater flexibilityPut your feet up in a place in the sunMore than a leg up for cash-strapped first-timers A middle house offers a place to shelterStretched customers stand up banks’ incomePound teeters near the topCustomers can click on advice beyond compareStellar presentation that could become dimmerWell-heeled tread a path to the hock shopHow landlords can avoid that 3am callA change in the method pension providers are required to work out the value of shares in their clients’ portfolios will lead to delays and extra costs for no obvious advantage, according to a leading provider of personal pension schemesThe new calculation formula, due to take result from October 6, could affect up to 150,000 self-invested personal retirement fund (Sipp) plans with assets calculation about £30bn, said Andy Bell, supervision director of AJ Bell, a leading Sipp administrator

HM Revenue & habits is insisting on moving over to what is recognized as the “quarter-up” method of valuing share holdings in people’s portfolios from that dateThe quarter-up means is used for the purpose of probate, valuing possessions in a person’s will The cost is based on the bid cost of a share plus one quarter of the dissimilarity between the bid and the offer costMost Sipp providers use a mid-market cost, which is intended automatically by stockbrokers, for valuing shares

Quarter-up prices are not intended by the software used by most stockbrokers so would have to be worked out by hand“This is quite frankly ludicrous,” said Mr Bell “The government is annoying to shake off a reputation for hitting business with crimson ribbon The changes to systems will cost millions across the investment industry and all for what

”The consequence will be to delay the calculation of the worth of share portfolios by up to 10 days and add £25 or more to the cost of calculating the value of a portfoliosplit valuations are characteristically required when a person retires and needs to calculate the value of their retirement fund fund and of any tax-free lump sum to be engaged from it People approaching retirement may find that their own calculations differ from the retirement fund adminstrator’s calculation based on the quarter-up methodValuations are also required if someone needs to buy a property using money from their pension fund

They may only borrow up to 50 per cent of its valueA assessment is also necessary if the beneficiaries of a small self-administered pension system (Ssas), frequently used by small commerce owners to build up a pension, decide to make a loan to their corporation“What is the point of this” asked one private customer stockbroker with a large number of pension fund customers

“It is only being done because it is the method used for probate Can they demonstrate that this serves any purpose at all – other than for tidiness“It will make only a decimal point of difference to the worth of pension funds but for us to provide a quarter-up valuation will be enormously costly and the client will finish up paying for it”The requirement for quarter-up valuations was introduced in the Finance Act of 2004 and had originally been due to take effect from April 6 – A-day – the day when pensions “simplification” took effect

But after lobbying by the pensions manufacturing, the Revenue granted a six-month change period during which time it allowed pension finance administrators to continue using the bid price, or a computation based on the mid-price minus 1 per cent These calculations could be approved out automaticallyThe Revenue said the manufacturing had had 2½ years to adapt to the change which was “ample chance”Last-minute negotiations over relaxation of the new rule are continuing

“I have been in conversation with the Revenue on this subject and they come into view genuinely sympathetic to our dilemma,” supposed Mr Bell “ Hopefully this will translate into a conquest for common sense”RSS news feeds = requires subscription to FTcom* smallest amount delay 15 minutesAll times are London timeFT HomeSite mapContact usHelpAdvertise with the FTPress enquiriesStudent offersFT ConferencesFT Research CentreCorporate subscriptionsFT collection Copyright The Financial Times Ltd 2006

"FT" and "monetary Times" are trademarks of The monetary Times Ltd solitude policyTermsEquity ISAsEquity TradingSaving for your ChildrenInvestment TrustsFourth column

Visit original article: