Traditionally, this period is supposed to be the summer lull, however, obviously the regulator does not agree, as it has been sending out updates all week.
Let’s start with Monday (4 August). It was a busy day - not for me, as it happens, I was on a beach in Barcelona - but for my colleagues that had to cover the long overdue and much delayed self-invested capital adequacy paper.
It revealed the regulator had made a widely-expected U-turn on its commercial property stance, and offered a welcome reprieve on the amount of capital adequacy that smaller firms must hold.
Many in the industry were calling for commercial property to fall under the Sipp standard assets list and it seems the regulator listened. Sipp firms had previously argued that forcing them to classify commercial property in the same bracket as unregulated investments was draconian.
The regulator had warned that the cap ad rules may force consolidation in the market, expecting the market to shrink by a fifth, but taken as a whole it seems the new rules will mean only half this amount will go bust.
This is all very welcome, as there are smaller firms out there who, through no fault of their own, may have been severely impacted by having to hold huge sums in reserve. Now, firms with less than £200m will have to hold less capital, with those with up to £100m being required to hold around £100,000, around a half of the figure under the original proposals.
But still 10 per cent of Sipps will exit, which might be no bad thing. This move should eradicate the market of the poor performing Sipp providers, who are giving others a bad name.
In the first acquisition since the cap ad rules, FTAdviser revealed today that Dentons has acquired the Sipp book of MAB Pensions Limited, part of the Michael Ambrose Group, for an undisclosed sum.
Only time will tell if this will be the first of many.
Bad Sesame
There has been much debate this year about the future of networks - how sustainable the models are in today’s market etc. Sesame was hit by a £6m fine last year and, more recently, Financial Ltd would have been hit with a £12.6m fine if they had the funds to pay it.
Now Friends Life, Sesame’s owner, has revealed that it has set aside £31m to cover expected redress due to Sesame’s mistakes. Friends Life even warned Sesame’s redress bill could exceed this. It posted an operating profit before tax of £159m, so this is a fairly robust profit dent to make.
This all points to Friends being keener than ever to conclude a sale, of which there have been rumours circulating for more than a year. But who would want to buy a business with such liabilities?
Stephen Gazard, Sesame Bankhall Group’s boss, revealed in an exclusive interview with FTAdviser that the sale rumours are “disconcerting” for advisers. Unfortunately, I suspect they will continue.
Will a Fad be a fad?
Also this week, the first of the technical papers on the new pensions freedoms was published, in which the government unveiled a trio of ways in which people can access their pension pots post April 2015.
Options include placing a fund into drawdown under a new type of fund known as ‘flexi-access drawdown’ (so, a ‘Fad’), from which consumers can withdraw any amount over whatever period they choose. Alternatively savers could provide an income by using their pot, or a portion of it, to purchase a lifetime annuity.
Alongside these familiar options, HMRC unveiled a third option that will allow savers to take lump sums from their pension after the age of 55, without crystallising the pot. Opportunities abound for those who might wish to delay taking their tax-free lump sum.
And opportunities are also open for those who wish to enter drawdown and still maintain their annual allowance of £40,000 - it has been cut for those that crystallise their pots to close a tax loophole - by entering capped drawdown ahead of the April deadline.
Only time will tell as to what trends we will see and what place annuities and drawdown will have in the market, but it is an interesting space to watch.
Simple is stupid
Earlier this week, Barclays launched a fixed-term life insurance product, the first to gain the new ‘simplified’ product kitemark. However, this was met with derision from advisers.
Advisers said the main issues were that it does not contain ostensibly simple elements that reduce its value significantly, such as terminal illness cover.
However, the protection gap is in the trillions and it is not improving. At £6 a month, surely this will be looked on favourably by consumers?
Having some protection in place is better than nothing, some may say. But on the other hand, if people are unaware of the lack of features and are then disappointed when the product doesn’t pay out, that will be yet another tarnish on the protection industry.
Maybe you just can’t win.
