Perhaps unsurprisingly, the momentous pension freedoms which finally came into effect on Easter Monday dominated the news in an otherwise fairly quiet bank holiday-shortened week.
The industry saw call volumes pick up markedly as the week went on after a slow start and advisers displayed a circumspect tone in these opening days. Beyond the pension rule changes, election rumours began to abound and buy-to-let regulations came into focus.
Here is our round-up of the week.
1. Just saying ‘no’.
In the final weeks ahead of implementation, some advisers suggested they would use their discretion to deter clients from draining pensions - and make clear they will walk away if the client insists on action against a recommendation.
On the first day back after 6 April’s ‘pension freedom day’, FTAdviser reported on the first of presumably many IFAs advising a previously transactional client of the tax implications of his withdrawal plan.
“The problem is if we are then blamed for people’s actions under the circumstances we find ourselves in a Catch 22 situation as a business,” stated the unnamed adviser, adding that “some providers are also indicating they will not act without the involvement of an adviser”.
This follows the Personal Finance Society’s warnings that the government and regulators run the risk of a future mis-selling scandal that will bring claims on advisers if they do not address the issue of ‘insistent clients’ acting against advice.
2. Clear trends yet to emerge.
With the benefit of a few days hindsight, it appears some of the expected trends have come to pass: significantly higher call volumes for providers and small pots more likely to be cashed in. But overall it has been a mixed picture reported back from those at the coalface.
On Tuesday, Fidelity’s head of retirement Richard Parkin stated: “It was mostly the small pots that were taking all the cash, not caring about the tax implications even when they were explained, while larger accounts were just taking the tax-free amount.”
By Thursday more providers revealed their first day’s worth of data, with a surprising similarity in the number of calls received: four firms reported 3,000 enquiries on their first day back.
Interestingly, Zurich said it had to refer 70 per cent of early pension freedom enquiries to ‘second line of defence’ warnings, while Aegon’s chief operating officer Tommy Young commented that there was widespread confusion amongst callers expecting to be able to sell their annuities now.
Finally, this morning saw some insights from advisers, again confirming that it has not quite been the big bang some were predicting, with enquiries generally split between those that require some very basic information or reassurance and those that already have a good idea what they want to do.
3. Mas still in the mire.
Inextricably linked to the freedoms through its responsibility for the post-Pension Wise retirement adviser referral directory, the Money Advice Service came in for more criticism this week.
Earlier in the week, the quango admitted it may scrap the ‘main office’ address element of its online directory, after advisers who tested the system said it could cause confusion in relation to those who either work from home or would otherwise travel to see clients.
This follows FTAdviser’s review of a ‘beta’ version of the site, which found inconsistencies with the proximity rankings system when searching for suitable advisers.
This morning, Unbiased’s chief executive Karen Barrett reiterated her (ironically biased) grievances over not being picked to host the directory, commenting: “It’s a waste of Mas resources to launch an adviser directory that duplicates what unbiased.co.uk already provides.”
4. Election rumour mill begins.
You may have noticed that there’s a general election rearing its ugly head on the horizon.
Aside from the many more spurious and unseemly battles that have been reported, this week saw Labour leader Ed Miliband landing the first big blow of the campaign with his pledge to scrap the tax relief offered to non-domiciled individuals.
Predictably enough, the following day his political rivals hit back with claims that during 13 years in government the party let ‘non-doms’ off with £2bn in tax. Industry experts accused the leaders of misinformation on the potential policy and a lack of crucial detail.
5. Buy-to-let centre stage.
Finally to that section of the mortgage market that keeps our inboxes full: buy-to-let.
This week saw the Council of Mortgage Lenders adopting a new statement of practice for its buy-to-let lender members, designed to provide clarity about how they should responsibly operate under the Mortgage Credit Directive.
Bob Young, chief executive of specialist lender Fleet Mortgages, stated that the move should help benchmark all buy-to-let lending activity, providing a level-playing field and raising standards right across the board.
Yet another industry sage - this time index provider MSCI - suggested that the at-retirement reforms could further stoke the fire underneath this market, with pensioners looking to invest in an asset class they understand.
peter.walker@ft.com
