July 13 saw the closing date for comments following HMRC’s consultation on part surrenders and part assignments of life insurance policies. The consultation put forward several proposals designed to remove the creation of disproportionate chargeable event gains. Under current rules, bond policy holders have the ability to take 5%pa of the amount they invested as...
For many the State Pension remains an important element of retirement planning. The latest government data shows that in the average pensioner household, 43% of income* comes from state benefits, mainly State Pensions. The State Pension is also changing. For people reaching State Pension age from April 2016, the current Basic State Pension and the...
Sometimes I think pensions are the Pringles of the financial world. Now the lid has been popped open (by pensions simplification and all that) the politicians just can’t let them alone. As you know, once you pop, you just can’t stop.
The next 12 months is shaping up to be yet another busy year for pension legislation and regulation. Here are my top five changes to look out for:
The new legislation governing pension freedoms now provides clients with the ability to access their defined contribution pension funds once they reach 55 and have control over how those funds are used.
These changes have raised a number of challenges for clients, financial planners and investment management services. To highlight and discuss the main issues surrounding these new freedoms, Sanlam Private Wealth commissioned a report written by Dr Paul Cox from the University of Birmingham. The report focuses on the key factors that influence the post retirement generation and how to plan for income in later life.
I am compelled to address the thorny issue of regulatory fees.
The bills received recently by Sense members, and of course those of all other advisers, have risen dramatically; the largest increase we have seen is an eye watering 300%.
We all know that the current system is unsustainable. The FSCS levy, for advisers with pension permissions, has risen three fold compared to last year and it is already warning that it may breach the £100 million levy cap on intermediaries.
In the run-up to the Summer Budget, the good people at Sense Network asked me for my thoughts on pension policy. So, obediently, I came up with six predictions on what George Osborne could have in store for pensions on 8 July and beyond.
Sense Network has now come back and asked: so Rachel, how many did you get right?
Now, this is alarming. As a pension pundit you get used to sprouting your opinion on where the whole pension mess is going. But you are less likely to be pulled up a couple of months later and asked to revisit what you said. It’s like getting your homework marked in public. But here goes. This is how I did.
The current debate (or perhaps I should say debacle) on insistent clients, shows just how much our profession is evolving and how fearful we have become of the regulatory system, which seeks to protect consumers from themselves.
On one level, as professionals, I really do find it difficult to understand why any adviser would want to help a client to execute a strategy which was against their interests. And I fear that FOS has an ingrained suspicion of transactions which have a contingent adviser charge and use insistent client processes to circumvent suitability rules.
We recently saw the FCA’s director of policy, David Geale, confirm that he thought it was too early to see a range of new pension products in the UK market. A view we share. Advisers are busy enough with regulatory and rules changes without also having to get to grips with a whole raft of new products. Plus, it’s worth noting that there are a number of products already available in the UK market to meet the varied retirement needs of consumers. While some of these may have been deemed ‘niche’ before, it is now time to see how they might fit into the new world.
Recent research reinforces what many financial advisers already intuitively know; customers want the nirvana of a lasting guaranteed income with the potential for growth. They also want legacy benefits to pass on to dependents, but without the normal longevity risks associated with drawdown or the inflexibility of a traditional annuity.
When the adviser charging rules were first promulgated there was a justifiable outcry about how this would benefit bancassurers and vertically integrated businesses. IFAs were rightly concerned about the potential for abuse in the way that costs of sale were calculated: much as they had been for years.
The FSA were very clear. The rules would ensure that businesses of this kind would need to fully cover distribution costs via their adviser charges and that no subsidy from manufacturers would be allowed.
And initially this scenario appeared to play out.
The Bank of England base rate has been at a record low now for 6 years and during that time the rates of interest available to savers have dwindled to record lows. As a consequence, it is entirely understandable that investors are seeking a better return with a minimum of risk.
But investors seeking better returns need to exercise enormous care. In the investment jungle there are many traps and, unfortunately, unscrupulous individuals who are quite prepared to lie, cheat and dupe the unwary.