The FSA needs to find a better way to oversee advisers

So, here we are safely in the RDR era. But how does the landscape look? Is the terrain as widely different as predicted by a few media naysayers?

I think not as I believe the financial advisory world is now a better place to be in and its reputation with the public will continue to improve. covering professional standards, charging, description of services and independence and restricted offerings. This will be done in three cycles beginning later this month. It will publish its findings after each cycle.

If advisory firms are not on track after the third cycle, action will be taken thereby filling the regulators purse and forcing RDR improvements to be undertaken by the firm.

All findings will be used to form a post-implementation review of the RDR. To me, this exercise sounds like a great deal of time intensive work to be undertaken by the Financial Services Authority.

Where will the time come from as it morphs itself into the Financial Conduct Authority, costing millions of pounds to change the name of the regulator across literature, business cards, advertisements and other expensively produced items?

My last IFA inspection visit took three bright young people employed by the then regulator more than three days to inspect my IFA business. We were a small firm with two RIs. Thankfully we were found to be satisfactory. This is one reason why I now help firms with regulatory issues.

It takes millions of pounds to thoroughly inspect advisory firms. Would it not be better for clients to feed back on their experience with financial advisers on a website similar to Trip Advisor from which the FSA can then follow up? For after all, some of the most experienced financial advisers, especially IFAs receive only circa 1 per cent of all FOS complaints. The FSA may be wasting its time inspecting many quality firms or will need to ‘nick pick’ to justify the huge cost of visiting firms.

The independent versus restricted debate continues but at last the banks have disclosed their charging structures.

HSBC is charging £950 upfront for those with assets of less than £75,000 which will cover the majority of the investing public. As HSBC is offering a restricted product range people may better be served seeing an IFA who will offer a more personal service, whole of market advice and will charge a similar upfront fee with the first meeting free. It is so much more conducive to receive financial advice at your work place, home, or in a social environment than making an appointment at a bank branch which can result in waiting in a banking hall full of people.

The bank advice could then be geared towards product sales as HSBC pay a bonus to high performing financial advisers.

Description of service is fairly straightforward with most of the information already on websites which will be checked out by clients before making an appointment. This is where clever market positioning is needed by those who offer the services to ensure the benefits of tax, inheritance and trust planning is understood.

The nirvana of being financially secure and debt free in both in sickness and health is, and always will be, about financial planning – not product sales. I wish the RDR was more about focused on highlighting the benefits of financial planning.

http://www.moneymarketing.co.uk/adviser-news/kim-north-the-fsa-needs-to-find-a-better-way-to-oversee-advisers/1064226.article

Money Advice Service healthcheck set for overhaul

The Money Advice Service has admitted its £2m online healthcheck tool “needs improvement” and has revealed plans for an overhaul.

In March, Money Marketing revealed MAS research showed of 1,000 healthcheck users, 300 did not remember doing it and an additional 371 failed to do anything differently.

MAS is currently the subject of a Treasury sub-committee inquiry. In June, MoneySavingExpert.com founder Martin Lewis branded its tools “crap” and “embarrassing”.

In a letter to Treasury sub-committee chair and Labour MP George Mudie, published today, MAS chairman Gerard Lemos highlights Money Marketing’s coverage and adds: “It is clear that overall the results of research done so far have pointed to the need for us to improve the health check.

“Building on this consumer insight, we will build a ‘mark II’ healthcheck which we expect to be far more impactful.”

A MAS spokesman refuses to disclose how much the redesign will cost, but insists it has already been factored into the 2012/13 budget.

Clayden Associates director Daniel Clayden says: “It is concerning as there was a large amount of money spent so the healthcheck tool should have been thoroughly tested. Hopefully it will learn from its mistakes.”

In the letter, Lemos reminded Mudie that the MAS began withdrawing previous remuneration arrangements for new staff on January 1. Existing staff began transferring to the new arrangements on June 1 but will be compensated for any lost income unless they leave or move position within the organisation. All directors are in the process of moving.

http://www.moneymarketing.co.uk/regulation/money-advice-service-healthcheck-set-for-overhaul/1057736.article

The new arrangements will be based around MAS’ reward strategy, developed in 2011, focusing on delivery of its objectives, the ability to recuit high calibre staff and affordability and value for money. It includes the withdrawal of flexible benefits package and non-contributory pension scheme.

Lemos says management recognised that staff transferred from the FSA were on unsuitable and unsustainable wages for a smaller, “more commercially-orientated” organisation.

This week MAS launched a six-week marketing campaign across television, in print and online with the tagline, “What does Ma think?”.

G7 to hold emergency eurozone talks

TORONTO/BERLIN – Finance chiefs of the Group of Seven leading industrialised powers will hold emergency talks on the eurozone debt crisis on Tuesday in a sign of heightened global alarm about strains in the 17-nation European currency area.   With Greece, Ireland and Portugal all under international bailout programmes, financial markets are anxious about the risks from a seething Spanish banking crisis and a June 17 Greek election that may lead to Athens leaving the eurozone. High quality global journalism requires investment.

“Markets remain sceptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen. So we obviously believe that more steps need to be taken,” White House press secretary Jay Carney told reporters.   Canadian finance minister Jim Flaherty said ministers and central bankers of the US, Canada, Japan, Britain, Germany, France and Italy would hold a special conference call, raising pressure on the Europeans to act.   “The real concern right now is Europe of course – the weakness in some of the banks in Europe, the fact they’re undercapitalised, the fact the other European countries in the eurozone have not taken sufficient action yet to address those issues of undercapitalisation of banks and building an adequate firewall,” Mr Flaherty told reporters.   The disclosure of the normally confidential teleconference came as EU paymaster Germany said it was up to Spain, the latest eurozone country in the markets’ line of fire, to decide if it needed financial assistance, after media reports that Berlin was pressing Madrid to request aid.   Angela Merkel, German Chancellor, and leaders of her centre-right coalition said in a statement: “All the instruments are available to guarantee the safety of banks in the eurozone.”   They effectively ruled out Spanish calls to allow eurozone rescue funds to lend money directly to recapitalise Spanish banks, which are weighed down with bad property debts, without the government having to take a bailout programme.   Berlin is pressing reluctant eurozone partners, including close ally France, to agree to give up more fiscal sovereignty as part of a closer European fiscal union.

source ” http://www.ft.com/cms/s/0/d3a243cc-aed3-11e1-a8a7-00144feabdc0.html#ixzz1wu7bH6um

Inflation increases to 3.5% in March

Inflation in the UK increased to 3.5% during March, as upward pressures on inflation came from food, clothing and the recreation and culture sectors. The CPI (consumer price index) rate increased from 3.4% in February , while the RPI (retail price index) rate shrank to 3.6% from 3.7% in February.

Prices in the food and non-alcoholic beverages sector fell by 0.5% between February and March, a lower rate than recorded during the prior year period, while increased fruit, meat and bread and cereals prices impacted the sector. In the clothing and footwear sector overall prices rose by 2.2% between February and March, while a slower rate of decline in the recreation and culture sector also helped push inflation upwards.

The biggest downward pressures on inflation came from the housing and household services sector where prices fell by 0.2% overall and the transport sector.

 

source “http://www.fundweb.co.uk/1049808.article?cmpid=14002&email=true ”

 

Budget packed with surprises?

The Chancellor is under serious pressure to produce a growth Budget on 21 March. But where will the money come from for tax cuts for entrepreneurs and businesses generally, not to mention other good causes? Increased borrowing is probably not the answer, if Mr Osborne has been influenced by Moody’s shot over his bows when the ratings agency recently designated a negative outlook for the UK economy.

One answer, according to commentators, would be to raid the higher rate tax relief on pension contributions – there have been several stories to that effect in the Financial Times and elsewhere. Of course, this has been threatened many times in the past. But this time could be different.

For a start there are people in the Coalition Government – the Lib Dems – who favour the policy. And discussions about the possibility of abolishing higher rate tax relief have been reported as taking place at the highest levels. The practicalities have been an inhibiting factor in the past, but now the legislators know exactly how to do it from their recent experience under the previous occupants of Downing Street. What’s more, it would look as if we really were ‘all in it together.’

Of course, there would be a lot of squealing – and quite right too. Yet what is the alternative political home for those who don’t like the idea? It is unlikely that most would be tempted into voting for Mr Miliband. David Cameron and George Osborne can blame Clegg and co. And there’s no getting away from the fact that it would raise billions.

So the Budget really could contain some major surprises this year – and pensions tax relief might only be one of them.

Source ” http://www.taxbriefs.co.uk/ngen_public/article.asp?id=0&did=0&aid=162&st=&oaid=0

Labour claims state pension reform has been “sunk”

The Government says it remains committed to its state pension reforms despite industry concern that public sector pension settlements threaten the proposals and Labour claims the Treasury has “sunk” the plans.

In April last year, pensions minister Steve Webb unveiled a green paper outlining proposals to bring an end to state pension means-testing and offering a higher state pension of around £140 at today’s prices by either introducing a single-tier state pension or accelerating plans to flat-rate the state second pension
Labour Shadow pensions minister Gregg McClymont (pictured) says Webb’s plans to reform the basic state pension may have been vetoed by the Chancellor due to the costs. He says: “State pension reform was the Government’s flagship pension policy. It appears it may have been sunk by the Treasury.”

Writing in Money Marketing this week, Hargreaves Lansdown head of pensions research Tom McPhail says public sector pension disputes will be making the Government nervous about state pension reform.

He says: “It is possible the Treasury is getting cold feet about the knock-on effect reform of the state pension would have on negotiations with the public sector unions over their final-salary schemes.

“The end of contracting out would mean an increase in NI rates for the five million public sector workers who are currently contracted out through their final-salary schemes.

“It is a safe assumption they would react very badly to being asked to pay 1.4 per cent in NI on top of the 3 per cent increase in member contributions which the current Treasury-led reforms of public sector pensions have demanded.”

Saga director general Ros Altmann says: “Any delay is likely to be linked to the public sector pensions issue but Webb and Work and Pensions Secretary Iain Duncan Smith are still committed to getting this reform through.”

Institute of Directors senior pensions policy adviser Malcolm Small says: “The issue of contracting out is a difficult one for both the Treasury and the DWP, particularly in relation to public sector workers, but there will be many more winners out of this than there will be losers.”

A Department for Work and Pensions spokeswoman says: “We will be bringing forward further proposals on a simpler and fairer state pension in due course.”

Source “http://www.moneymarketing.co.uk/pensions/labour-claims-state-pension-reform-has-been-sunk/1044201.article

Markets regain majority of losses despite Italy concerns

European markets have recovered most of their early losses despite concerns that Italy may be the latest country to fall victim to the eurozone crisis.

At close, the FTSE 100 stood at 5510.82, a fall of 0.3 per cent from its opening price, while the French Cac 40 and the German Dax were both down 0.6 per cent.

Markets across Europe fell by around 2 per cent in early trades as concerns were raised over political uncertianty in Italy. The yield on Italian 10-year bonds rose from 6.37 per cent to a high of 6.64 per cent, before falling back slightly. Prime Minister Silvio Berlusconi is set to face a vote on public finance tomorrow.

Meanwhile, Greek prime minister George Papandreou has stepped down to make way for a unity government of all political parties, despite winning a vote of confidence late last week. A new prime minister will be named to head the coalition government, with fresh elections forecast for early next year.

source http://www.moneymarketing.co.uk/investments/markets-regain-majority-of-losses-despite-italy-concerns/1041028.article

Auto Enrolement or Nest (Do you know what it is?)

More than 100 employers around the UK have agreed to enrol some of their staff in the new national top-up pension scheme known as Nest – the National Employment Savings Trust.

Employers will not be formally obliged to begin the phased enrolment of their staff in Nest until October 2012.

If they already run a decent pension scheme, then all staff can be automatically enrolled in that instead.

But in a “soft launch” that began in July this year, a variety of small, medium-sized and large employers have volunteered to start the Nest process.

This will gradually ramp up activity, so that the Nest system will be absolutely ready come October next year.

So, how is it going?

“It’s going pretty well,” said Tim Jones, the chief executive of Nest.

“What is happening here is probably the single biggest implementation of behavioural economics, certainly in the financial sector, that’s been done yet.”

The basic facts

Automatic enrolment, either into Nest or an existing company scheme, begins in October 2012 and will apply to workers who:

are at least 22 years old but below their state pension age
earn more than £7,475 a year
Minimum contributions will be paid on their earnings between £5,035 and £33,540.

Employers will start paying a minimum of 1% of qualifying earnings, rising to a minimum of 3% by 2017.

Employees will start paying a minimum of 1% of their qualifying earnings, rising to a minimum of 5% by 2017.

The process of employers joining Nest and automatically enrolling their staff to it – or to their own pension scheme – will start with big and medium-sized employers between 1 October 2012 and July 2014.

Small and micro employers will have to join in the process between August 2014 and February 2016.

sourc “http://www.bbc.co.uk/news/business-15270701

 

 

Labour to target higher-rate pension tax relief

Labour has set its sights on higher-rate pension tax relief, declaring that too much Government money is being spent on the pensions of higher earners.

Speaking at a fringe event at the Labour conference in Liverpool this week, Shadow pensions minister Rachel Reeves said the Government should look at redistributing some of the £20bn a year it spends on pension tax relief.

She said: “We spend £20bn a year on tax relief for pensions and two-thirds of that goes to higher-rate taxpayers. Half the population get just 10 per cent of that £20bn. So I would like the Government to look at ways to make pension tax relief more efficient, more effective and better value for the taxpayer in incentivising the people who most need to save.”

National Association of Pension Funds chief executive Joanne Segars said: “We need to remember we are talking about tax relief here. There are a large number of people who get higher-rate tax relief on their contributions but they also pay tax at a higher rate when they retire and we should not lose sight of that.”

In 2009, Labour proposed a reform of higher-rate pension tax relief which would have seen relief cut for people earning over £130,000.

The complex measures were scrapped by the coalition Government which instead implemented a £50,000 annual allowance while continuing to allow individuals to receive relief at their marginal rate. It also announced a cut to the lifetime allowance from £1.8m to £1.5m from April 2012.

Scrapping higher-rate relief was a LibDem policy before the election and was promoted by current pensions minister Steve Webb.

Hargreaves Lansdown head of pensions research Tom McPhail says: “If Labour are going to raise the issue of tax relief, it is essential they look at the broader pensions tax landscape rather than simply looking at higher-rate relief in isolation. Making it

fairer will be harder to deliver than it is to speculate on and I am not convinced now is the right time with automatic enrolment starting next year.”

ould look at redistributing some of the £20bn a year it spends on pension tax relief.