A surprise not from the regulator on the guidance ‘second line of defence’ dominated headlines and divided opinion this week, while continued debate on the popularity of pensioner bonds and concerns over so-called ‘zombie’ schemes unable to offer April’s freedoms also made news.
Here are our five key themes of this week:
1. FCA asks providers to save savers from themselves.
Monday began with the Financial Conduct Authority‘s ‘Dear CEO’ letter to pension providers, setting out plans for them to help protect savers from themselves post-April questions by asking suitability-style questions and offering tailored risk warnings and advice referrals.
The FCA sought to re-cast the now-popular ‘second line of defence’ phrase as “additional protections”, which will for some suggest a relaxation of advice boundaries and certainly entail more work for already embattled insurers.
The life companies hit back by querying exactly how far they will be expected or allowed to go when questioning customers’ retirement decisions, with several demanding “urgent clarity” from the regulator on the detail of the proposals.
Advisers meanwhile, suggested that the timing would be crucial, with Intelligent Pensions’ Andrew Pennie warning that information packs and guidance may come to late.
It came in the same week the regulator’s chief executive Martin Wheatley’s admitted to MPs this week that they “screwed up” on handling the life company review pre-briefing last year and that he regretted sounding a combative tone with his famous “shoot first, ask questions later” line.
MPs also enjoyed taking a pop, with Mark Garnier accusing the FCA of a “cack-handed” media strategy.
2. Beware the zombie invasion.
Our sister-title Financial Adviser unearthed a number of ‘zombie’ pension schemes and providers which are not burdened with the need to look alluring to new savers, being possibly unable to offer members the full range of flexible options on freedom day.
Phoenix Group and Equitable Life, along with Legal and General, all suggested that some legacy schemes they run were unlikely to offer things like flexi-access drawdown or full encashment for those over 55.
No sooner was the ink dry on the article, than opportunists jumped at the chance to offer those trapped retirees their right to full flexibility from 6 April.
Equity release firm Age Partnership announced a flat fee service - with both advised and simplified drawdown options - to let the mass market get their hands on full pension pots. Others will surely follow, you’d have thought.
3. Pensioner bond fever continues.
Up to £10bn worth of NS&I pensioner bonds were made available a couple of weeks ago - crashing their website in scenes one of our writers related to Glastonbury ticket fever - and still had the industry in raptures as recently as this Wednesday.
Our guide to the over-65s guaranteed growth product certainly helped this renewed interest, as did columnist Jeff Prestridge’s musing on what their solidity says about the paucity of similar non-government-backed products.
He also made the argument - which appeared to resonate with readers - that the re-introduction of either index-linked savings certificates or fixed-rate certificates would have been fairer for those of all ages, as younger savers struggle with dire rates of return for their own savings.
4. Evidence of an evolving advice model.
A few stories this week suggested that evolution in advice models is picking up pace in the post-Retail Distribution Review world.
The diversified mutual Wesylan rolled out a ‘virtual face-to-face’ service for its 340-consultant strong advice unit, prompting other advisers to bemoan the lack of similar software offered by their existing providers.
The outspoken Alan Solomons, director of Alpha Investments and Financial Planning, took it as far as to say that anything less than proper integration between back and front office is “Dickensian”, calling on advisers to revolt against IT systems stuck in the past.
Meanwhile, former Personal Touch chairman Martin Wilson received full network status for his latest venture, The Right Mortgage and Protection Network, which will help those that don’t actually want to be in a network.
He explained to FTAdviser that it will fulfil a transitory role and assist advisers seeking to become directly authorised, following which it would continue to offer compliance and other support services, via a partnership with SimplyBiz.
For once, all comments at the bottom of the article were positive, surely some indication that such a structure could be what’s needed to bring some positivity to a roundly beaten network sector.
5. Victory for building society, blow for landlords.
Finally, in a case we’ve been following for some time yesterday (29 January) a High Court judge ruled in favour of the West Bromwich Building Society over complaints by 400 buy-to-let landlords fighting a sharp increase in the cost of their tracker mortgages.
The now closed specialist lending arm, West Bromwich Mortgage Company, was deemed to be within its rights to hike rates by 2 per cent as a result of “changing market conditions”.
A spokesperson for West Bromwich explained “the increase was made to reflect changing market conditions and the need for us to carry out our business prudently, efficiently and competitively and in the best interests of our members.”
One wonders what the wider lending market implications will be.
peter.walker@ft.com
