The doom-mongers predicted financial Armageddon with retirees left destitute after blowing their retirement savings, but were sadly disappointed, as hundreds of thousands of investors took sensible decisions with their savings.
Apparently people who save diligently don’t lose their senses when given the keys to the piggy bank – who knew?
Pension providers were and are divided into those, such as Hargreaves Lansdown, who want to give their clients the choice to exercise the freedoms and those who are seemingly more worried about asset retention.
The sword of Damocles has hung over pension tax relief all year and now looks set to fall next March.
The Summer Budget tweak to pension input periods has created the potential for a double tax year allowance “buy again while stocks last” until April.
Baroness Ros Altmann’s appointment as pensions minister gave the pensions industry cheer and hopefully her previous criticism of the lifetime allowance will lead to its abolition.
Second hand annuities won’t be available in 2016 but the work to create the rules and process will be.
Another April milestone was the ability to transfer child trust funds to Junior Isa. Long overdue.
Financial planning was given a boost with new tax free allowances and a change to dividend taxation to negotiate from April 2016. Inheritance tax planning has become more complex with the family home allowance phasing in from April 2017.
Older savers started the year with the bonus of market beating NS&I 65 Plus Growth Bonds (“pensioner bonds”) attracting over £13bn before closing just after the General Election (the timing a coincidence I am sure).
More generally savers have lost £150bn in interest since the financial crisis.
2016 will see greater scrutiny on cash returns and continued speculation of an interest rate rise, especially as the Fed are expected to go first and before Christmas.
In my view interest rates are unlikely to move during 2016 and if they do it will be at the margins.
Opportunities remain to ensure clients don’t hold too much cash and make the most of what they do hold.
The impact of much higher allowances saw £20bn more going into Isa in the tax year 2014 to 2015 than the year.
However investment into stocks and shares Isas fell.
With less than 20 per cent of the UK population holding a risk asset compared to 60 per cent in the US, more work is needed to promote investment.
The forthcoming increase to stamp duty on investment (and second) property, plus a limiting of tax relief on associated mortgage payments phasing in from 2017 should help.
It has not been a stellar year for investors: at the time of writing the FTSE All Share is barely above where it started although smaller and mid-caps have done much better.
Oil burners such as the airlines, and homeowners, have all been the beneficiaries of the falling oil price.
House builders generally benefited from the housing shortage and government plans to up the ante.
Emerging markets will be glad to get 2015 out of the way. European monetary policy over promised and under delivered but you would hope the only way is up (ish) in the Eurozone. Grexit was the word in the first half of the year; Brexit will probably become the word of 2016.
The best stock pickers continue to deliver better returns in uncertain and volatile markets, and the FTSE 100 finally breaking 7,000 in the first half of 2015 seems so long ago now.
Peer to peer loans have been granted their own, Innovative Finance Isa from April 2016, ring-fenced from stocks and shares and giving considerable credibility to what is still a relatively immature market.
Crowd funding debt joins P2P in Isa from April but fortunately equity versions remain in consultation.
Regulation remains an ever present theme.
The Retail Distribution Review is barely a memory and we now have the Financial Advice Market Review.
Advice is a binary proposition – you are either getting advice with all the protections and associated risks or you are not.
Simplified advice doesn’t really exist in the market.
What people need is a bit of help or guidance and this can’t currently be delivered within the rules in a way in which it will give people the best help.
HM Treasury are behind this initiative so it has the best chance of producing a decent outcome. Let us hope they also keep Financial Ombudsman Service in the loop.
Expect advisers living in the dark ages to continue to blame the RDR for almost everything (including Chelsea Football Club’s current form and childhood obesity) including a lack of availability of advice in a market neither they, nor any other adviser firm, has ever really effectively and successfully served.
Also expect the numbers of investors who want to choose a combination of non-advisory and advisory services to continue to increase, and the adviser firms which adapt their services to this trend, flourish.
As for Hargreaves Lansdown, Christmas leaves little time for reflection with the busiest time of the year for us starting in January.
We are an ambitious bunch and don’t do complacency or laurel resting.
There are a host of improvements planned for next year, including further fund launches as well as the new HL Savings business.
Our aim remains to be the UK’s number one choice for savings and investments.
Danny Cox, head of financial planning at Hargreaves Lansdown
