RegulationDec 5 2014

Five key themes from this week’s news

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You don’t need me to tell you that this has been a busy week. It was the Autumn Statement and a few surprises were in store. By the sounds of it at least, advisers will benefit from the changes announced.

Here are the five key news themes which emerged this week:

1. Stamp duty slab stamped out.

The biggest ‘surprise’ that came out of the Autumn Statement - although it was already on the front page of the FT that morning - is that the draconian ‘slabbed’ stamp duty system will be reformed.

While George Osborne was praised for reforming this archaic tax, there were immediate questions as to whether you would be better off on the old system or the new, as people who were in the completion stage having exchanged before midnight could choose.

Indeed, as soon as the speech was over, my editor had a call from a contact to that effect, with the resulting consensus being that he would be better off by £2,000 under the new system. In fact, 98 per cent of people will be better off under the more progressive income tax-style regime.

Interestingly, the Evening Standard (among others) splashed yesterday on a ‘rush’ of wealthy individuals buying properties above £937,000 looking to complete by midnight on 3 December, some paying agents thousands in sweeteners to do so, to avoid paying the higher rate of tax.

This is rubbish. To clarify, the Autumn Statement document says: “Transitional rules will allow buyers who have already exchanged on a home but not completed before 4 December 2014 to choose whether to pay SDLT under the existing or new rules.”

2. Isa and annuities join ‘death tax’ changes.

The government also confirmed speculation that joint-life and guaranteed annuities will be coming into line with the new pension ‘death tax’ benefits - but threw in a shock when it confirmed Isas would similarly be relieved of death charges.

From 3 December, if an Isa holder dies, they will be able to pass on benefits to their spouse or civil partner via an additional Isa allowance, available from 6 April 2015.

The surviving spouse or civil partner will be allowed to invest as much into their own Isa as their spouse used to have, in addition to their normal annual Isa limit.

In relation to the annuity changes, several commentators warned that while there is now an equally attactive regime across all money purchase income options, the disparity to defined benefit would likely lead to a “flurry” of transfers.

One provider told FTAdviser that ahead of the raft of pension reforms coming in April, it is refusing transfers except where the client was fully advised, and that other providers and advisers should introduce measures to protect against inappropriate transfers.

3. Government will clamp down on tax avoidance.

The Amazon’s of this world will have to pay at least some UK tax, Mr Osborne said on Wednesday. He stated that to mitigate diverted profits tax, a new levy will be introduced to charge company profits diverted to another country by aggressive tax planning, taxed in the UK at 25 per cent from 1 April 2015.

Furthermore, individuals who are party to tax avoidance arrangements aimed at giving tax relief for losses arising on miscellaneous transactions, will not be able to offset the losses against other income.

There will be also be a further consultation on marketed avoidance schemes looking at promoters and serial avoiders.

4. Sipp service still falls short of expected standard.

Elsewhere, Hornbuckle revealed to FTAdviser that it will offer a settlement to an unhappy adviser who received a pre-RDR incentive deal to transfer business to them. The adviser claimed the firm was not living up to their promises by reneging on the deal and continually making administrative errors over a number of years.

To Hornbuckle’s credit, the firm tackled the issues head-on when approached by FTAdviser and admitted that while it is trying to change the way they do business, a number of legacy issues do remain.

Worryingly, following the publication of the story, we received a number of emails from advisers who also wanted to leave the provider but not pay the often large exit fees, feeling that their clients have paid enough due to service errors.

Unfortunately this is all to common in the Sipp world and while some other providers have recently cut exit fees, this still remains a barrier.

5. Simplified advice is on the radar.

Finally, FTAdviser revealed earlier in the week that software firm Suitable Strategies is looking to develop a free ‘capability passport’ that consumers can use to access simplified advice from a variety of providers.

The passport could be used with either advice firms or product providers offering simplified models.

This is an interesting move, as while some advisers are keen on offering some form of simplified advice, there are fears that this could bite them further down the line.

On a similar note, several trade bodies approved the ‘simple product’ framework created by the Sergeant Review from the British Standards Institution.

The framework was designed to encourage the generation of simpler products to engage mainstream consumers.

However, it has not proved popular with advisers, with Barclays bearing advisers’ wrath when it launched a simple product with the kitemark. It remains to be seen what can be achieved with this, but surely it’s a step in the right direction.

donia.o’loughlin@ft.com