The plans to end compulsory retirement at age 65 are contained with a consultation document called Phasing out the Default Retirement Age. This was published by the Department for Business, Innovation & Skills (BIS).

The proposals to phase out the default retirement age will result in it being abolished by October 2011. The phasing out will begin in April 2011.

Under current rules, employers can force their staff to retire at age 65, regardless of their circumstances. An employer needs to give a minimum of six months notice of retirement.

The consultation remains open until October and comes at the same time as the government makes plans to increase the State pension age, initially to age 66.

Assuming the proposals go ahead, it will be the first time that those over age 65 years have full employment rights.

Employers will need to give careful consideration to the proposals, looking at the impact on employment legislation and related issues such as employee benefits.

Abolishing the default retirement age makes it more challenging to plan for retirement, so individuals will need to determine their own planned retirement age and align their retirement income plans accordingly.

Whilst the legal right to work beyond age 65 is a positive move, it is important to recognise that it may not be physically possible for everyone to achieve this, particularly in some types of work.

Poor health, sometimes caused by work-related factors, is often a cause in forcing early retirement. Planning to provide an income in retirement from a reasonable age remains an essential part of financial planning.

Here at Informed Choice, we have considered each of these findings in turn to see how we measure up to the requirements of individuals classed by the study as High Net Worth or Ultra High Net Worth.

We believe similar requirements are demanded by the majority of IFA clients.

Investors want to be more involved in their investment choices

This suggests that an advisory rather than discretionary approach to investment management is preferred. This approach to investing fully engages the client, because before any changes can be made to their portfolio, their approval must be obtained by the adviser.

An advisory approach also enables the investor to carefully consider the advice before taking action. With discretionary investment management, any reflection must happen after the event.

Here at Informed Choice we operate on an advisory basis.

We do work closely with a select number of discretionary fund managers, for use with clients who prefer this approach for part of their portfolio, but typically we find that investors want the control associated with an advisory approach to their money.

They want more specialised advice

We have no doubt that there has been growing demand for more specialist knowledge and advice in recent years. As a firm, we have embraced the importance of higher level professional qualifications, becoming the 99th firm of Chartered Financial Planners in 2007.

Clients want to know that their adviser has demonstrated their technical competence through professional examinations. This, combined with experience and good standards of ethical behaviour, is what makes a professional adviser.

They are demanding full product disclosure and transparency

Transparency is a very important part of our philosophy and has helped us ensure that our clients have avoided opaque investments in recent years, including private finance, hedge funds and structured products.

We deliver full product disclosure by putting our advice in writing and sending this to each client before it is presented, giving our clients the opportunity to scrutinise any small print and understand our recommendations. We always invite questions when we present our advice to ensure that our clients fully understand what we are recommending.

They are more concerned about the downside risk

Our assessment of attitude towards investment risk, reward and volatility forms a central part of our recommendations to clients. We need to know a lot about how our clients feel about risk before giving advice.

We further strengthened this assessment a number of years ago by introducing a more robust psychometric risk profiling questionnaire which we use with every client. This is combined with our Financial Planners taking the time to understand tolerance to risk before a recommendation is made.

They are validating advice through other sources

In recent years we have seen client use of Social Media increase rapidly. This is becoming an increasingly important way in which our clients find information, get answers to their questions and obtain referrals to trusted professionals.

We always encourage people to get a second opinion on advice they have received, if they are in any way unsure about its suitability. In fact, over the past twelve months we have acted as a ’sounding board’ to clients on several opportunities before they have taken action on advice from other sources.

They want products they can understand

We actively avoid unnecessarily complex financial products and investments. If we are unable to easily understand a financial product and explain how it works to our clients in plain English, it has no part in our toolkit.

They want improved client reporting and more frequent updates

We take pride in the frequency and quality of our client communication. During the credit crunch and global financial crisis, it was natural for us to continue communicating to our clients when some of our competitors were instead choosing to avoid answering awkward questions.

All of our clients receive an annual written review report as a minimum, with many receiving this level of reporting half-yearly or even quarterly. We also encourage every client to receive our free weekly email newsletter, which contains important financial news, views and opinions.

The CapGemini World Wealth Report always makes interesting reading and, as a benchmark to which we can test our own proposition, we enjoy confirming that we are delivering what clients want.

Our thanks to Steve Billingham for providing an excellent summary of the main client requirements contained with the World Wealth Report.

It came as little surprise to learn today that the Financial Services Authority (FSA) is taking enforcement action against six IFA firms due to their failings in the sale of these products.

This enforcement action is a result of a review of the use of UCIS by IFA firms, prompted by supervision and Treating Customers Fairly (TCF) assessment work completed by the regulator last year.

The FSA review addressed concerns about three main areas; lack of awareness of the regulatory requirements for UCIS, lack of understanding of the UCIS market and risks, and promotion of these unregulated investments that breached FSA rules.

The findings of this review are disappointing, to say the least.

Rules on promoting UCIS were broken by 78% of the firms reviewed. In simple terms, UCIS cannot be promoted to the general public. They can only be promoted by an authorised person, or by an unauthorised person where the promotion has been signed off by an authorised person.

A set of exemptions exist which enable promotion of UCIS to certain types of investors, namely certified high net worth investors and sophisticated investors.

In 22% of the cases reviewed, the firms failed to demonstrate the suitability of their advice. In 52% of cases, the firms did not obtain adequate information about their clients to evidence suitability.

Whilst UCIS themselves are not regulated in the same way as the regulated collective investment schemes we recommend to our clients, they remain subject to FSA rules in terms of their promotion, distribution and suitability.

Investing in an UCIS poses a higher risk to an investor than investing in a regulated collective investment scheme. They tend to invest in assets not available to regulated funds, often because they are riskier or less liquid. They are also not subject to the same investment and borrowing restrictions as regulated funds.

You also forfeit your right to support by the Financial Ombudsman Service (FOS), if you have a complaint, and coverage by the Financial Services Compensation Scheme (FSCS), if you require compensation.

Sadly, as is often the case when poor selling practices are uncovered in retail financial services, high commission payments and other incentives appear to have played a role.

The FSA explained with their findings that advisers were being wooed by high commission payments from UCIS, and often get offered free trips to resorts when they are talked into offering them to their clients. That this sort of thing is still occuring in an increasingly professional advice sector is a clear signal that a further drive towards increased professionalism is needed urgently.

We can only hope that the new requirements being introduced in 2012 for all financial advisers to be qualified to a higher professional standard and operate on a more transparent remuneration basis will go some way towards solving a problem like inappropriate UCIS sales.

Successive Governments have made a real mess of the UK pensions system which used to be quite simply the best in Western Europe.

The changes that the current Government are proposing seem to be “tinkering at the edges” and this is likely to have the unintended consequences of making things worse not better.

It is a time for radical change to simplify and modernise the system and give the UK consumer the certainty around retirement planning that they deserve.

My package of recommendations (it has to come as a package and not piecemeal) is as follows:

-Introduce a Basic State pension of £10,000 per year for those with a National Insurance contribution record of 30 years. Make this pension available at age 66. Index this pension in line with CPI.

-Abolish the State Second Pension for future accrual.

-Abolish contracting out for all schemes and have just one rate of NI contributions regardless of membership of pension scheme or not.

-Remove RPI linking of public sector schemes and replace with CPI indexation.

-Pay for the above by removing tax relief for all contributions to pension arrangements.

-Allow access to pension funds and benefits that have been accumulated but take a tax charge (30%) for those who do so. Have them sign a “social contract” so that they cannot later come back and claim State benefits if they use their pension fund unwisely and run out of money.

-Abolish all the rules and regulations surrounding pensions such as the Standard Lifetime Allowance and annual contribution limits.

Those who want to retire before age 66 or who need more than £10,000 that they will get from the State will have to save to achieve that.

There will be those who argue against the abolition of tax relief claiming that tax relief encourages savings but I would argue that this is inefficient and simply is not working.

The cost of the above would need to be calculated (I don’t work for the Treasury) but it seems that taken as a package this is likely to be cost neutral or possibly even raises current revenue to the Government.

But don’t hold your breath! Politicians are fearful creatures and don’t like wholesale or radical change even when it is in the interests of the majority of consumers.

What changes do you think the Government should introduce?

During the webcast, Andrew will be discussing Financial Planning for Legal Professionals.

You can watch the webcast live here at 11.30am and a recording of the event will also be available online later today.

The well respected Ernst & Young Item Club has entered the debate with a prediction that the Bank Rate will need to remain at 0.5% until at least 2014.

This prediction follows one from the newly formed Office for Budget Responsibility (OBR), who believe interest rates will need to start going up again next year.

The Item Club have based their prediction on the scale of planned government cuts which are likely to hold back economic growth over the medium term.

At the same time, they say that inflation will remain above the government target of 2% for CPI for the next 18 months, with high energy prices and the VAT increase supporting this.

So, assuming that the 0.5% Bank Rate remains in place for another three years or more, what does this mean for your Financial Planning?

It suggests that the return from cash, particularly in real terms after inflation, is going to be dismal. Some good deals can be had from fixed term cash deposits, but savers are going to need to erode their capital or take greater investment risk to deliver the income levels they were used to only a couple of years ago.

Low interest rates will mean lower expenditure on debts, including mortgage repayments. The next few years will be a great time to reduce outstanding loans.

Another consequence of low interest rates is that the return from other investment asset classes is likely to be more modest. This could result in investors adopting a more global approach to investing their money, as other economies recover at a more exciting pace and create opportunities for greater returns.

Over a year the FTSE 100 has risen from 4,559.80 (752.82 points or 16.51%).

£1 is currently worth $1.54210 US or €1.19560 Euros.

Brent Crude Oil Future is currently priced at $77.57/barrel. Gold is $1,190.50/ounce and Silver is $18.17/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 3.2% for the year to June 2010.

The research from Capita found that companies will pay out 19% less to investors this year than they were paying at the peak in 2008.

Whilst companies in the UK have generally been increasing their dividend payments, this does not compensate investors for the suspension of dividends from BP who have cancelled a payment of £5.4 billion.

This cancelled dividend is greater than the FTSE 250’s £5.3 billion in dividends that will be paid this year.

A big problem in the UK market for dividend income is the concentration of big payments from only a few companies. In the first half of 2010, the top fifteen companies paid two thirds of all dividend payments to shareholders.

This concentration makes income seeking investors particularly vulnerable to cuts in dividend payments from one or more of the biggest payers.

The consultation paper describes how pension income will continue to be taxed at income tax rates. No big surprises there.

It goes on to explain that any unused funds on death will be taxed at a rate to recover past relief, unless they are used to provide a dependant’s pension. They think that an appropriate ‘recovery charge’ would be 55%.

Under current rules, if you die before age 75 after taking tax-free cash from your pension fund but whilst still in Unsecured Pension (previously known as Income Drawdown), then the tax charge if your beneficiaries take a cash death benefit is 35% of the unused fund.

The tax charges get much more expensive after age 75, if you are in Alternatively Secured Pension (ASP), although this retirement income option will no longer be available to new retirees.

The consultation paper does point out, helpfully, that death benefits for those that die before age 75 without having taken any benefits from their pension will remain tax-free. This is the same as the current arrangement.

So, should you still take your tax-free cash?

The proposals suggest that by taking tax-free cash, you expose your beneficiaries to the risk of paying tax at 55% rather than 35% if you die before your 75th birthday and if they opt to take the death benefit as a cash lump sum. Other death benefit options exist.

Whilst death benefits are clearly an important factor when deciding on the most suitable retirement income option, they must be considered in conjunction with a whole range of other factors, including the desired level of income flexibility, annuity rates and investment risk.

If you do not need the tax-free cash from your pension fund in your bank account or direct control, then leaving it in the pension fund retains the tax-free death benefits, unless you die after your 75th birthday when they will continue to be taxed.

Of course there is nothing from stopping the Treasury from removing the tax-free status of cash from a pension fund on retirement in the future, further complicating the decisions people reaching retirement need to make about their pension benefits.

As has always been the case, it is essential to seek professional independent financial advice before making lasting decisions about retirement income options. Choosing the right retirement option is and always will be about so much more than finding the best annuity rate.

The research from independent financial research company Defaqto found an 87% increase in the number of funds launched recently that permit the use of derivatives.

In an uncertain economic and financial environment, it is perhaps unsurprising that fund managers are choosing to use derivatives to better manage risks within their funds.

A derivative is a financial instrument with its value linked to the price of something else. They include swaps, futures and options. Derivatives can be used to hedge risk within an investment portfolio, acting as a form of insurance against unwanted events.

The research also found a 39% decrease in the number of new fund launches that solely invest in the UK. This highlights a growing demand for funds investing overseas where the potential for greater returns is perceived to be higher.

It is also interesting to note what the new funds are doing. Just because new fund launches are using derivatives and investing internationally does not mean you should necessarily embrace these trends within your own portfolio.

Both trends create the potential for more risk within the fund, as fund managers can get their use of derivatives wrong and overseas investments tend to carry greater risks than those in the UK, for UK investors.