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Research* conducted by Skandia, the investment company, has found that nearly 60% of independent financial advisers believe that the proposal by the Financial Services Authority (FSA) to ban legacy commission from 1 January 2013 will have a detrimental impact on their customers. These advisers believe as many as 40% of their customers could be disadvantaged which suggests that 1.8 million people could be disadvantaged.**

Advisers are feeling more confident about the UK economy but unemployment and government spending cuts are of growing concern, according to Skandia’s latest Adviser Confidence Barometer*. The survey showed a 13% increase in confidence in the first quarter of this year compared to the last quarter. Advisers rated their confidence as 5.2 out of 10 (10 being most confident), up from 4.6 in Q4 last year.

People with ‘enhanced protection’ on pensions valued up to £1.8 million could benefit from switching to fixed protection before the tax year end deadline. If they continue with enhanced protection, their maximum tax-free cash allowance will fall to £375,000 from 6 April, which is 25% of the reduced £1.5m Lifetime Allowance (LTA). However, if they switch to fixed protection then the maximum tax-free cash available would remain at £450,000, which is 25% of the current £1.8m LTA, resulting in an extra £75,000 in available tax-free cash.

With rumours around the removal of the 50% tax rate and the reduction of the annual allowance, Skandia predicts that significant numbers of higher and additional rate taxpayers will use the coming weeks as an opportunity to maximise their contributions, and will then opt out of the pension system by applying for fixed protection. Once these wealthy individuals have opted out of the system, there will undoubtedly be a lower cost to the government going forward as the amount of tax relief they give away will reduce.

Investors sought out equity income funds and opted for lower risk bond funds with their ISAs during January, signalling a cautious start to this year’s ISA season. 

Investors sought safe haven in Cash and Global Fixed Interest funds largely at the expense of equities during 2011, suggesting that there is a wall of money waiting to be switched into equity funds as confidence returns, according to Skandia International’s analysis of its customers’ investment behaviour.

On 6 April 2012 the lifetime allowance (LTA) for pensions is due to decrease from £1.8m to £1.5m. People aged 55 or over with pension savings that could reach £1.5m have the opportunity to maximise their available LTA provided they take action prior to 6 April 2012.