No feather in Osborne’s cap over pension exit fees

But this announcement lacked substance. This suggested to me that it was rushed out to dampen negative stories on possible plans to axe higher-rate tax relief.

The Chancellor’s comments raised a number of questions. How long will it be before investors benefit?

What is an excessive charge? In fact, what is a fair charge and what is an unfair charge when talking about a long-term pension contract?

I have argued that it is difficult to justify any exit charge on a pension that has been held for 20 years or more – whether it be commission or anything else. If a firm has not been able to make a decent profit over that time then there is something seriously wrong with its business model.

Meanwhile, there remains the spectre of market value reductions (MVRs) – something that apparently will not be part-capped. Those running with-profits funds continue to argue that MVRs are essential to make sure investors are protected and that nobody goes off with more than their fair share.

Those running with-profits funds continue to argue that MVRs are essential

But let us consider what investors may have been told when they signed up.

Back in 1999 my then-colleague Pauline Skypala wrote about what were then referred to as market value adjustments and the effect they might have on a with-profits endowment, pension or bond in the event of steep stock market falls.

She was immediately set upon by leading insurance companies and a number of IFAs accusing her of scaremongering and arguing in strong terms that MVAs had never been applied and were unlikely ever to be used.

Now, if this is how they reacted to a journalist raising such a possibility, we can only imagine how much emphasis was placed on them at the point of sale. Indeed, any investor who even noticed them written into the contract would probably have had their fears dismissed out of hand.

While an investor may have signed up to such a contract, it is highly unlikely they understood its significance.

Of course, the then-FSA conducted an inquiry into with-profits. And, as might have been expected, fudge was the order of the day.

So, to return to my original point, is any exit charge fair on a contract that has been running for decades rather than a handful of years?

I do not think so – unless it was clearly pointed out to the client on day one. And given the sales practices that were rife in the 1980s and 1990s, I suspect that this would be a very rare case indeed.

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Whose side will Bailey be on?

Andrew Bailey appears to be an astute appointment as the new boss of the FCA.

He has a reputation for being tough but fair from his time at the helm of the Prudential Regulation Authority. And he is undoubtedly very bright. You do not get a PhD in economic history at Queens’ College, Cambridge from sitting on your brains.

To the banks he is a known quantity, so they will no doubt be happy. They will be doubly gratified that in 2014 he made it clear that he was against capping bankers’ pay and previously warned against huge fines of the type imposed in the US.

He is unlikely to come out all-guns-blazing as his predecessor Martin Wheatley did. And it seems possible his appointment may tip the balance of the regulator towards the City and away from the consumer.

His appointment to the FCA should end a period of uncertainty. It will be interesting to see which issues he places at the top of his agenda.

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Gorham’s maths don’t add up

Hargreaves Lansdown’s boss Ian Gorham has stated in a newspaper article it would cost about £300 a year to run £100,000 portfolio of shares – much less than running a buy to let.

Mr Gorham bases his estimate on a typical Hargreaves investor self-managing a mixed portfolio of shares and funds.

That is all very well if you are a sophisticated investor.

But many people who consider buy-to-let are not sophisticated investors. They are happy buying houses but do not have the knowledge to buy individual shares.

For them, funds would be the way into the stock market. So they would face fund costs – say 0.6 per cent at best – and a maximum 0.45 per cent charge platform fee, though with a cap for ETFs and investment trusts.

Face-to-face advice if they wanted it, could cost £1,495 plus VAT.

That all adds up to rather more than £300 a year.

Tony Hazell writes for the Daily Mail’s Money Mail section