FTAdviser has had a busy week: not only is the Christmas slowdown definitely over as our inboxes overfloweth with news, but we also held two successful events on the eternally popular topic of tax-planning conference, as well as a live online debate on the mortgage market.
Continuing to dominate headlines was the fallout from landmark Pension Ombudsman decisions, which purposefully backed providers over blocked transfers but offered procedural criticisms which have left concern over looming pension freedoms.
Here’s a round up of the top five themes from this week’s news.
1) Providers need to stick to liberation rule-book.
A week ago, the Pensions Ombudsman published three landmark decisions on insurers preventing transfers to suspected liberators.
In all cases, Tony King found the providers had not infringed upon the now sanctified statutory right to transfer, however he did warn providers that they need to carry out and document “the analysis to establish” such. Essentially: they hadn’t done their groundwork.
This week, FTAdviser revealed that one of the alleged liberators, pension administrator Warwick and Eaton, is set to continue pushing for a transfer on behalf of a prospective client currently in an Aviva personal pension.
One of the ombudsman’s criticisms was that none of the receiving schemes were workplace pensions, however Warwick and Eaton is now stating that it can make changes to its scheme and two years after the initial request has a ‘deed of participation’ in place.
It claims Aviva will have ‘no choice’ but to comply this time. Having read the decision I’m not so sure.
2) Pension freedom withdrawal concerns.
On the wider issue Aviva’s John Lawson told me earlier this week that liberators could read the detailed decisions to work out how to get round the rules - and both he and others, including Standard Life’s Jamie Jenkins, reckon the whole thing will get worse after pension freedoms.
Who needs to ‘liberate’ a pension when the client can do that themselves and then just transfer good old, non-penalty tax attracting cash?
This is all very apposite. Earlier this week a Channel 4 Dispatches documentary revealed up to 2m people could be the target of unregulated firms seeking to take advantage of new pension freedoms to encourage people to transfer their savings.
An undercover reporter posing as a pension saver was offered various investment opportunities including a parking bay in Dubai and forestry in central America. Some offer apparently amazing returns: I’ve seen schemes promoters promising 20 per cent a year and more.
People need to be more ‘savvy’ - if it sounds too good to be true then it is. It’ll be up to guidance providers to nip this in the bud from April, I guess.
3) MMR is benefitting few.
Yesterday, FTAdviser held its second live mortgage debate on the mortgage market, focusing on the Mortgage Market Review and other changes affecting access.
We put out several polls during the debate and it is clear people are questioning who the MMR is actually benefitting. The first poll asked advisers if they have struggled to get a mortgage for their clients post-MMR: a big majority of 76 per cent said yes.
A different poll found that 50 per cent of advisers believe that the MMR is affecting first-time buyers the most. Data quoted revealed last year there were 326,500 first-time buyers, 19 per cent below the 2006 peak, but in actual fact the proportion of loans going to FTBs has risen.
Advisers also thought MMR was affecting sub-prime borrowers (14 per cent) and interest-only (29 per cent).
4) Potential IHT relief restriction.
The story that garnered most page views this week was from FTAdviser’s tax planning conference on Wednesday (14 January).
Speaking at an FTAdviser tax planning seminar in London, Tom Elliot, partner at tax advisory firm Crowe Clark Whitehill, said the government could be set to impose modest restrictions on the way Business Relief can be used to shelter money from inheritance tax after the next election.
He said he’d heard “whispers” changes could be brought in to require beneficiaries to hold a qualifying unlisted asset for a number of years after death of the owner, to bring the policy back to its original intention of allowing entrepreneurs to pass on business interests.
It comes as the election lead-up has already brought us a strong hint from the Tories they’ll raise the currently frozen £325,000 nil-rate band, something they also said in 2007. I’d take nothing for granted.
5) Advisers paying more levies.
More levy news came out this week: advisers will be contributing £4.2m out of £35m to the ‘guidance guarantee’, set to be implemented in April. The Treasury’s statement added that the levy will be confirmed in March as part of the FCA’s fees consultation paper.
Advisers questioned why they have to pay for it at all when “it has nothing to do with us”. One lawyer, who declined to be named, told me yesterday that he finds it galling that the financial services industry must pay for a service that may have little benefit to financial services.
Still, it could be worse. Deposit acceptors, life insurers, portfolio managers, and managers of collective investment schemes or pension schemes will each pay £7.7m.
donia.o’loughlin@ft.com
