FCA’s claim it was misled by Keydata is beyond words

It is difficult to find a word to encapsulate my reaction to the admission that FSA staff felt they were misled over the performance of Keydata products.

Its successor, the FCA, alleges that three senior Keydata figures made false representations in compelled interviews with the regulator. The FCA says they failed to disclose problems with one of the underlying portfolios and a spreadsheet provided by Keydata to the FSA was “highly likely to mislead”.

But are not these well-paid and supposedly highly-qualified people supposed to be able to sort the wheat from the chaff?

Are not these well-paid and supposedly highly-qualified people supposed to be able to sort the wheat from the chaff?

Is it not their job to sniff out the rotten fish rather than leaving investors and advisers to suffer a bout of poisoning?

These are not the hapless staff of a regional building society who were told to sell this product. They are supposed to be the cream of regulation.

Investors and financial advisers are supposed to be able to rely on their skills to spot a wrong ’un.

Here they failed to spot the bad investment – but while some in the private sector have paid with their livelihoods, they have been able to walk away unscathed.

Just an interjection here to say that the Decision Notices on this affair have been referred to the upper tribunal – but they are on the FCA’s website for all to read.

Let us not forget the FSA’s abysmal track record on this affair. It had placed traded life policy investments on its Product Risk Framework in 2007, and named Keydata.

It noted a “significant probability of high relative potential loss” yet it made no move to warn the general public or their advisers, allowing products to continue to be sold until Keydata collapsed in 2009.

More than 30,000 investors ploughed in £475m after taking advice from IFAs who, presumably, were similarly bamboozled. The cost to the rest of you via the Financial Services Compensation Scheme was £330m.

This was a grand failure of regulation – one of many under the remit of the thankfully defunct FSA.

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People didn’t go pension potty after all

It is early days yet, but anecdotal evidence suggests that on the whole people are not spending their retirement savings on Lamborghinis or any other frivolous purchases.

So once again the British investing public has disproved the gainsayers who claimed they were not sensible enough to manage their own money.

I have always been a major advocate of investing for retirement through pensions. But, equally, I object to politicians and vested interests in the finance industry trying to tell investors how they should access their money. We save the money, we should control it when it comes to spending it.

Fidelity Worldwide Investment in a nice synopsis tells us that those seeking to access cash are mainly just taking their tax-free lump sum.

And of the small amount of people calling about annuities, half are enquiring about selling them.

The main note for concern is that 7 per cent of calls are coming from those with defined benefit pensions who do not understand the value of what they have. That is fine if they are contacting Fidelity or another reputable firm – but it suggests more education is needed from trustees.

People are also voting with their feet and seeking to transfer funds from firms who are not offering the full pension freedoms.

The message from these findings is that most people are engaging positively with the new pension rules.

It is their money and insurance companies can no longer forcibly strip them of it through compulsory annuity purchase.

There will always be some who want to make rash decisions, but on the whole, those who are well-informed will use their money cautiously and sensibly.

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Tax relief on BTL interest distorts prices

Rented accommodation accounted for 77.4 per cent of new households created in the year to March, according to a Kent Reliance analysis of ONS statistics.

You may be one of those who believes tax relief on buy-to-let mortgage interest is legitimate business relief.

I disagree. It is being used as a form of investment tax relief and is demonstrably distorting the housing market particularly at the first-time buyer level.

Those who argue that removing it would disrupt the market should consider how it was removed from homebuyers.

Making the relief available at the basic rate of tax only, and then gradually removing it over the next three or four years will allow time to adjust.

And if it does put a break on price rises, then that can only be good for first-time buyers.