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?”.

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.

 

US debt-limit bill heads to Senate

The US Senate is to vote on a bill to raise the nation’s debt limit, one day after the House of Representatives backed it and hours before a deadline.

Monday’s vote in the House appears to have averted the prospect of the first full-scale US federal debt default.

Members of the 100-seat Senate will vote at midday (16:00 GMT) on Tuesday. If approved it will be signed into law by President Barac

The bill has the backing of Republican and Democratic leaders in the Senate and is thought likely to win the support of the 60 senators it needs to pass.

In the House on Monday evening the bill passed by a clear margin of 269 votes to 161.

Despite ongoing reservations about how the bill would fare with conservative members of the House, the bill won the backing of 175 Republicans, with 66 voting against.

Democrats were more evenly split – 95 for and 95 against.

The vote was notable for the reappearance in the House of Congresswoman Gabrielle Giffords for the first time since she was shot in the head in Tuscon, Arizona in January.

Ms Giffords – who has undergone a number of operations – caught lawmakers by surprise when she appeared on the floor of the House on Monday evening.

There was a standing ovation and embraces for the Democratic representative, who voted in favour of raising the debt ceiling.

k Obama.

 

The deal ties a $2.4tn (£1.5tn) debt increase to spending cuts.

The Senate vote will take place barely 12 hours before Washington is due – according to the US treasury department – to cease to be able to meet all its bills.

Pension Changes

Financial Secretary to the Treasury, Mark Hoban MP has announced a series of
changes to the pension rules. The main changes include:

 

  • for 2011/12 the amount of the annual allowance will be
    reduced to £50,000 (from the current £255,000)
  • the method of calculating the amount of pension input
    amounts will be changed
  • there will be rule that allows carry forward of unused
    annual allowance from the last three tax years, and
  • from April 2012 the lifetime limit will be reduced to £1.5m.

Hutton recommends career average pensions for public sector

Lord John Hutton has recommended pensions for public sector workers shift from final salary to career average provision before the end of this Parliament.

In the final report of the Independent Public Service Pensions Commission, published today, the former Labour minister sets out detailed structural reforms designed to make public sector schemes “sustainable and affordable”.

He resists calls to introduce a hybrid scheme with a salary cap “due to the complexity this introduces to the system”, instead suggesting Government implements tiered contribution rates to reflect the “different characteristics” of higher earners.

Other key recommendations include linking the normal pension age in most public sector schemes to the state pension age, setting a “clear cost ceiling” for public provision to limit taxpayers’ exposure to employees’ pensions and introducing stronger, independent governance regimes across public service pensions.The pension age for uniformed services employees – which includes the armed forces, police and firefighters – will be 60.

The report says the cost ceiling, which has not been specified, should be the proportion of pay that Government will contribute. If it is breached, a consultation would be issued to bring costs back below the ceiling. However, if the consultation ended in deadlock Hutton says there should be a default mechanism which could take the form of an increase in employee contributions or a decrease in accrual rates.

The commission says accrued rights should be protected, meaning the final salary link for past service for current members would be maintained. It also proposes an overhaul of the legal framework for public service pensions to make it simpler.

Hutton (pictured) says: “These proposals strike a balanced deal between public service workers and the taxpayer. Pensions based on career average earnings will be fairer to the majority of members that do not have the high salary growth rewarded in final salary schemes.

“The current model of public service pension provision is clearly not tenable in the long-term. There is a clear need for reform. Getting the decisions right on the most appropriate structures and designs will be crucial to making any changes work in the future. This will only be achievable if there is effective dialogue between public service employers, employees and unions.”

The commission has not recommended specific levels for accrual rates, indexation and employee contributions as these remain “a matter for Government”. However, Hutton does warn that setting contribution rates too high would risk low-earners opting out of the scheme.

The report also recommends that benefits are increased in line with average earnings during the accrual phase for active scheme members. Post-retirement benefits should then be linked to prices to ensure they maintain their purchasing power.

The Treasury is currently in discussions with representatives from the Trades Union Congress over how a 3 per cent increase public sector pensions contributions will be phased in from 2012.