Mixed reactions in first week of Nisa launch

The day prior to their launch, True Potential warned savings will actually reduce in value if savers use their Nisa allowance to invest in cash alone.

Out of those intending to use a Nisa, 44 per cent of 2,000 people polled by True Potential said they would invest in cash only and just one in 10 are planning to invest the maximum £15,000.

Daniel Harrison, senior partner at True Potential, said: “If savers use their Nisa allowance to invest in cash alone, their savings will, in almost all cases, reduce in value due to the poor interest rates offered by high street banks.”

But what about the interest rates offered by the Nisa themselves?

FTAdviser revealed this week that providers have lowered interest rates.

Scottish Friendly said that more needs to be done in communicating the alternatives to the New Isa that are available for investors.

Neil Lovatt, director of financial products at Scottish Friendly, said the cash Isa market “has not risen to the opportunity”, instead choosing to offer low rates of interest on cash Isas and in some cases actually reducing their rates for fear of overly high inflows.

Competition for new deals has been relatively scarce with a only a few providers launching brand new ‘best buy’ worthy products, he adds.

It is a well-known fact the UK population is not the best at setting aside cash, hence auto-enrolment was introduced.

You would have thought that providers would be offering good rates to attract people and to urge them to save but clearly we are not seeing that.

However, Financial Adviser columnist Kevin O’Donnell believes the Nisa offers advisers further opportunities to revisit clients and review their investments to shift more assets into a tax-free environment.

Only in a year’s time will we see how popular and useful the Nisa has been.

Loggerheads

In other news, FTAdviser sister publication Financial Adviser reported Treasury select committee member Mark Garnier warned the Bank of England and the government appear to be at loggerheads over the housing market, giving Help to Buy with one hand and taking away mortgages with the other.

At the latter end of last week, the Financial Conduct Authority said it was set to publish “general guidance” to firms to fulfil recommendations from the Bank of England to introduce mortgage income multiple caps to cool the housing market.

Prior to this, two state-owned lenders announced they were set to limit LTI multiples for Londoners.

Mr Garnier is quoted as saying: “I have always maintained that when the FPC starts to intervene, that is when we will get confused as to how monetary policy is carried out.”

Indeed.

FCA crackdown

By far the story that attracted the most attention this week was John Lappin’s weekly comment for Investment Adviser.

The FCA is set to give its views on the new pension freedoms brought about by chancellor George Osborne, set for implementation in April 2015.

Mr Lappin wrote: “That paper will surely make for very interesting reading when it does arrive. Could the FCA end up restricting what is after all a dramatic liberalisation of pension income choices?

“Liberalisation and conduct regulation strike me as unlikely bedfellows, so the FCA’s inclination may be to restrict things but the political reality may be that it can’t.”

Under the new rules, which are under consultation, once someone reaches age 55 they can withdraw all their pension and spend it as they wish.

There are undoubtedly concerns that some people will spend it all at once and fall back on the state pension, however, perhaps the advice sector will benefit as more people will be turning to financial advisers for advice.

There is no doubt the extra flexibility will bring extra responsibility but it is extra responsibility on the public and not the advice industry.

There have been calls for the FCA to give some guidance to advisers on the ‘decumulation’ market, which the watchdog said it is not “specifically looking” at decumulation as part of retirement guidance plans.

Advisers benefit from cut fees

Late yesterday (3 July) afternoon, the FCA published its policy statement on fees and levies. In its final rules, it confirmed that advisers will pay a total of £6m in FCA fees in 2014 to 2015.

In total, the fee block, which financial advisers are part of, will contribute 15 per cent of the regulator’s annual funding requirement, amounting to £68m.

What is interesting is overall the regulator’s annual funding requirement will increase 3.3 per cent on 2013 to 2014 to £446.4m.

The FCA said almost all respondents to the the consultation “challenged the increase”, highlighting that it was in addition to “significant increases in recent years”.

There was also, unsurprisingly, a general call for the regulator to be more accountable in the way it controls its costs and for greater transparency on how we spend our AFR, the reasons for increases and the basis for the distribution of the AFR across feeblocks.

The FCA said the main reason for the increase is that it has not been able to return as much under spend to fee payers as last year. The regulator said it returned £19.5m in 2013 to 2014 but a reduced £10m in 2014 to 2015.

It also blamed the Budget increase on its new competition team to deliver its competition objective.