Diversification is at the heart of modern portfolio theory. Harry Markowitz’s 1952 groundbreaking article demonstrated that since each asset has its own unique characteristics, investors could create an infinite number of portfolios with different levels of expected return and risk. He also devised the concept of an ’efficient frontier’, showing all potential portfolios that offered the highest expected return for each given level of risk.

With confirmation from the Conservatives that they will not scrap personal accounts should they win next year’s general election, it is now more certain that personal accounts will come into force in 2012 as planned.  The framework of the personal accounts scheme is set out in the Pensions Act 2008, and we have had some details of the “shape” that the scheme will take in the consultation on the draft scheme order and rules which closed on 20 July 2009.  However, although personal accounts are to be structured as a trust based scheme in common with many occupational pension schemes, the unique nature and potential size of the scheme (the DWP estimates between 2 and 8 million members and hundreds of thousands of participating employers) mean that the scheme has certain unique and potentially sizeable problems to overcome if it is to be judged a success.

Summer is over and by the time you are reading this everyone will be well and truly ‘back to school’. The weather forecasters got it wrong as the heat wave never really did arrive in England despite us all booking ‘staycations’.

The Budget of April 22, 2009 introduced fundamental changes to pension legislation. Chancellor Alistair Darling announced that from April 6, 2011 income tax relief on pension contributions will be restricted for those with total income (relevant income) of more than £150,000 per annum.