Personal PensionSep 25 2015

From drawdown debate to Keydata commotion: The week in news

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From drawdown debate to Keydata commotion: The week in news

This week the FTAdviser family was out and about, hosting two forums about the recent retirement freedoms, with speakers whipping up quite a debate on the drawbacks of drawdown.

Of course those that didn’t get to travel to Edinburgh and Manchester also got to read about the debates as well as lots of other interesting news, so here is our round-up of what you needed to know:

1. Drawdown debated.

Never one to shy away from a stushie, Money Box presenter Paul Lewis enlivened our conference in Scotland by suggesting that providers pushing drawdown could cause a “potential mis-buying scandal” and instead saying advisers should recommend more cash accounts to at-retirement clients.

He stated that the industry “is just promoting expensive, invested, drawdown products that carry on taking a percentage of our money for doing almost nothing”.

Delegates, and several IFAs on Twitter, were quick to question Mr Lewis over whether cash accounts were a good option for clients, who could see their savings quickly eroded by inflation.

Among the other speakers that day The Pension Advisory Service’s head of guidance Charlotte Jackson revealed some interesting insights from the first few months of offering Pension Wise.

She said that one of the biggest challenges is around managing the expectation gap, with many over 55s expecting a significant windfall, but in fact being sent back to their providers to get more information.

2. Altmann admits flaws.

Pensions minister Ros Altmann responded to criticism of the way the government has handled the introduction of the new state pension, by conceding it has been hard work simplifying the “mind-blowingly complicated” system.

She was adamant it was now clearer and fairer “but the job of explaining to people how the reforms will affect them hasn’t been done well enough”.

The state is now rolling out a new advertising campaign explaining the new setup prior to full launch in April next year. The baroness added: “One of my first actions on becoming pensions minister was to identify this priority, and I’m very pleased to now be launching this major campaign.”

3. Warnings against the wild west.

Yesterday (24 September), FTAdviser sister paper Financial Adviser reported on IFAs calling on the regulator to force the placement of cigarette-style investment warnings on unregulated investment funds.

Industry stalwarts Alan Steel and Martin Dodd complained they were constantly being bombarded by unsolicited calls and emails about such schemes.

“There should be big warnings: ‘damage to wealth or health’,” commented Mr Steel, while his fellow sheriff Mr Dodd stated: “With no ‘policeman’ to keep them in check, it could be described as the wild west.”

Both pointed out that investors must be made aware that if something goes wrong, the fact these investments are unregulated means they will have very little protection if any, and have little recourse to recover lost money.

The Financial Conduct Authority responded as usual that it is not a product pre-approval body. “However, we recognise that firms are cautious, so we welcome firms coming and discussing with us any products they intend to launch about which they have concerns,” added a spokeswoman.

4. Prepare for platform zombie apocalypse.

The week began with yet more speculation around the future of a few large platforms, begging the question of what does the future hold for a sector long expected to constrict and consolidate.

Standard Life’s wrap boss David Tiller weighed in with some opinions, suggesting that advisers should be, and in some cases already are, preparing for the fact the platforms they use may be closing, merging or turning into ‘zombies’ sooner rather than later.

The group’s house view is that by the end of 2018 there will be half the platforms that there are today, with as few as six in the adviser space supporting independent centralised investment propositions, as many will opt for going direct or targeting only institutional money.

As for whether the Scottish financial services giant will be doing any of the acquiring, Mr Tiller remained coy, but did add that it wouldn’t rule any attractive opportunities out.

Another wrap from north of the border, the rapidly-growing Nucleus, also chipped in on the market’s future, with founder David Ferguson stating: “Other platforms have spread themselves a bit too thin and in the post-RDR shake-up, if your users aren’t winning then you won’t either.”

5. Acrimony in the air after Keydata decision.

On Tuesday the FCA confirmed it was fining former Keydata finance director Craig McNeil £350,000 and banning him from performing any significant influence function.

By this point you probably all know the back story here, but this latest twist in the tale followed recent decision notices for the firm’s senior management Stewart Ford, Mark Owen and Peter Johnson, which they referred to the Upper Tribunal.

No details on Mr McNeil’s possible appeal yet, but later in the day he did make a rather angry statement on the regulator’s decision, branding it “ill-informed, inaccurate and self-preserving”.

He added that the FCA’s closure of Keydata was “particularly harmful to the investing public” and added that the regulator was determined to be seen taking action against the management to cover the watchdog’s own mistakes.

peter.walker@ft.com