According to the committee the proposals do not adequately demonstrate why a cap on charges would have “a zero net impact on the pensions industry”, as was claimed in the government consultation.
This follows on from previous debates, with pension experts warning that a reduction in the cap to 0.5 per cent, which is gaining industry support, would expose the charging structure of the National Employment Savings Trust, which could be seen as “expensive” and “a rip-off pension”.
The Pensions Regulator also announced this week that a looming ‘capacity crunch’ among pension providers could begin to surface in a significant way in the opening months of 2014, far earlier than current expectations that providers may begin closing doors in 2015 and beyond.
While there is no doubt that auto-enrolment is a positive move, with opt-out rates far lower than expected at around 10 per cent, the devil is in the detail, as these stories show.
A FTAdviser commentator said on the latter story: “...the framework proposed is proposterous. If this works I will eat my hat, the logistics and complexity of it all make it unworkable in my eyes.”
Perhaps the government should be working on removing the complexity, as opposed to adding further unnecessary layers.
Credit where it is due
The Financial Conduct Authority should be applauded for finally giving a little clarity to the issue of consumer credit, however the real elephant in the room is still who needs one.
This week the regulator did not announce which financial advisers will need one, but it did amend the fee structure so that smaller firms are not hit with fees of up to £15,000 for a two-year licence. It was an extraordinary move in some respects, as the proposed structure is still subject to an active consultation itself.
The new structure will include an overlay based on a firm’s income. The previous categorisation was based solely on the complexity of the firms activities.
Last month, the FCA’s homepage had a new addition, which urged businesses to register for interim permission for a consumer credit licence before its generous offer of a reduced fee lapsed at the end of November.
The problem was, and still is, that advisers do not know if they need a licence or not.
While the FCA seems to have finally bowed to pressure, it has once again missed the point. It needs to inform advisers whether they need a consumer credit licence or not. As the Association of Professional Financial Advisers said earlier this month, it’s too costly to get one ‘just in case’.
I doubt this will be announced while the consultation is ongoing so advisers will have to wait with bated breath until the guidance is eventually published.
A tangled web of....
FTAdviser also revealed this week that liquidated advisory firm 20Twenty Independent, which entered liquidation proceedings earlier this year amid complaints over controversial tax-mitigating film schemes, could be the subject of further claims relating to investments in the liquidated Axiom Legal Financing Fund.
What a tangled web. I find it interesting that the two are inter-linked, with Axiom currently being torn apart by its receivers, who previously told me that the process is frustrating as they have not been able to identify all investors and are therefore prevented from directly communicating with them.
It’s the investors who are the ultimate losers in this, as well as the industry who once again will pay the price for a failed firm.
A FTAdviser reader commented: “Many of those who regulated and sold this fund seem to be heading to liquidation as victims of this collapse. Are the authorities involved in this mess?”
Good question. As we have seen this year, it seems to be a trend for firms to enter administration only to phoenix and re-appear as a completely new firm.
While no one is saying that 20Twenty has phoenixed, it is interesting that Totus Capital, a legally separate sister company of 20Twenty that also uses the Totus brand, is registered at the same address and has taken on a number of 20Twenty’s clients along with eight advisers but not the liabilities.
The liabilities remain with 20Twenty, which is now in the hands of liquidators CMB Partners. I think this is only the tip of the 20Twenty iceberg. Watch this space.
