Where were you all? IFAs absent from pensions bill debate

All sorts of experts were invited to give their views to a committee of MPs.

Witnesses included pensions regulator Mark Boyle, FCA director of policy David Geale and Michelle Cracknell from The Pensions Advisory Service. All good solid witnesses.

There were also appearances from the Money Advice Service. That was day one. But where, I wondered, were the people who will be delivering the advice on these changes? Where were the IFAs?

They must be appearing as witnesses on day two. So I checked the agenda. This was headed up by David Pitt-Watson, author of the devastating pensions report which turned the spotlight on the corrosive effect of charges.

There were representatives from Cardano, First Actuarial, KPMG, Aon Hewitt, the Financial Services Consumer Panel and the Confederation of British Industry. But as far as I could see, no one with experience of giving advice directly to the public.

Day three brought in pensions campaigner Ros Altmann and Jane Vass, head of public policy at Age UK. There were people from consumer rights group Which?, the TUC and the Pensions Policy Institute, and Dominic Lindley, formerly of Which? financial services policy team.

And so to day four. We had the National Association of Pension Funds, the Association of British Insurers, a regulation expert from Towers Watson, pensions journalist John Greenwood and someone from a body called the Strategic Society Centre, before pensions minister Steve Webb came in as the headline act.

Unless I have missed something, there was not a single frontline IFA in four full days of taking evidence

So, unless I have missed something, there was not a single frontline IFA in four full days of taking evidence.

What does it say of MPs’ attitudes to IFAs that none were called? What does it say of the lack of coherence within the IFA sector that it has nobody deemed worthy of representing it? Surely IFAs should have been there putting forward their views on pension reforms implementation, how their businesses might be impacted and how their clients might be affected.

So where were you all, why were your views not considered to be sufficiently important for anyone to be called? That is surely something the IFA community should be thinking through very carefully.

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Higher-tax bracket risk if cashing in pension pot

There hasn’t been too much written on the tax implications of next year’s pension freedoms so far. But Tom McPhail, head of pensions research at Hargreaves Lansdown, has produced a fascinating analysis based on a survey of 1,247 adults aged between 45 and 65.

It suggests up to 200,000 investors are preparing to cash in their pension savings next year. Based on the median pension pot of £29,000 Mr McPhail estimates this could generate a windfall of between £800m and £1.6bn for the Treasury.

Behind this headline-grabbing figure lies a serious issue. Many who are planning to take their money appear to have no idea of the personal tax implications.

In particular, it is doubtful that some realise taking all their money at once could send them into a higher tax bracket.

So someone who has been a basic-rate taxpayer all their life and received only basic-rate tax relief on their contributions could be paying a higher-rate tax on their pension.

Obviously they would be wiser to take the money over several years while keeping a close eye on their tax bracket.

This is an issue of education for which we must all take responsibility. How people spend their money is their decision but making sure they receive as much as possible is down to us.

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Equity release dodgy dealings

Last week I wrote about the expanding equity release market and the potential for mis-selling.

A few days after I penned my column, the BBC’s Moneybox programme tackled the same subject.

If you did not hear it then I would suggest you catch up on Radioplayer. Presenter Paul Lewis dissected the issue very nicely and had some disturbing case studies.

One was of a woman who had taken a £50,000 equity release and, on the advice of a financial adviser, used most of the money to buy a lifetime annuity.

Mis-selling? It sounded very dodgy to me.

Why would anyone borrow a lump sum against their home and then invest it in a product paying considerably less than the interest they are being charged?

Surely that person would have done better to take a drip feed via an equity-release drawdown scheme?

Any area of personal finance that is dealing in large sums, and people who are relatively unsophisticated financially is bound to attract some who are unscrupulous.

I am not convinced we need tighter regulation – yet. But what we do need is strict enforcement and monitoring of the regulations that do exist.

Tony Hazell writes for the Daily Mail’s Money Mail section.

t.hazell@gmail.com