In what was a relatively quiet week for news by recent standards, the short week before Easter saw yet further discussion and dissection of the government’s now rather threadbare pledge to deliver “impartial face-to-face advice” to those approaching retirement from next year.
In truth we’re being a bit naughty in continually quoting it as ‘advice’. Mr Osborne argued robustly in front of the Treasury Committee that he had used the term in his Budget speech in relation to his pension overhaul in order to make a general point.
In fact, the pledge has always been described in official documents as ‘guidance’. Moreover the Association of British Insurers, whose members will deliver the service, has admitted it is not going to be “free”. That is is delivered by providers at all also calls into question the notion of it being impartial, too.
What we are left with is still a rather well-meaning idea of giving retirees some idea of what their income needs will be in order to persuade them to be prudent. According to newspaper headlines this morning, this will include telling them how many years they have left (in general: more than they’d have thought).
The real good news was always thought to be that not only will the liberalisation potentially encourage more to see pensions favourably, but that more may seek full-blown advice.
This week, however, PricewaterhouseCoopers blew a hole - specifically a “black hole” - in this narrative by confirming that people will indeed want to take advice (63 per cent said they would seek a financial adviser), but that few will want to pay under new rules.
Yes, we’re back to the old Retail Distribution Review again. Apparently average people with less than £40,000 to invest won’t be viable advice targets and don’t appreciate advice costs - and PwC isn’t the only one saying so this week, either.
I’m not sure I see it as negatively as all that. But I will say that whether or not the lack of access to advice is as acute as is suggested, these debates do highlight the importance of taking advice and the shocking lack of focus on this in recent years.
Perhaps it is time for the government to look at how to increase access to regulated financial advice. I cannot think of a more effective way to reconcile the dual imperatives of giving people greater freedom but ensuring they are more self-reliant.
HMRC rebate revelations
The other major news this week saw another old issue back at the top of the news agenda: the ban on platform cash rebates and, specifically, the tax treatment of legacy payments and future unit rebates.
The tax watchdog has apparently had to field a bunch of questions since it announced it was taxing rebates at just two weeks notice, so it has acted quickly and brought out some guidance following the year anniversary of the changes coming in to clarify the situation.
It, for example, said providers could pay the tax bill for clients. Thank goodness they cleared that up, more than 12 months after Standard Life, to name one firm, made such an offer (which actually expired in December when it went fully ‘clean’).
There were some interesting nuggets in there for advisers and advised clients, though, such as that any payment will usually be taxed if at any point it is paid to the customer directly, irrespective of whether it is subsequently passed on to cover advice or other charges.
Clients must also pay tax on any trail commission which is paid to them following the removal of a previous agency agreement. Such payments are not classified as annual payments when they are made to an adviser, as they are then treated as trading income.
FCA Sipps into action
So, we’ve finally had some action on two of the issues the FCA has seemingly been concerned about for a while: dodgy Sipp transfers involving esoteric underlying investments, and specifically large-scale concentration of such client funds into beleaguered property investment firm Harlequin.
Earlier today (17 April), two partners of a firm which transferred 2,000 clients into Sipps, close of half of which were invested in Harlequin, were banned by the FCA. It’s the beginning of what is sure to be more action after repeated warnings over the past year or two.
Interestingly, the fines were waived in order to prevent them going to the Treasury, and instead the duo agreed to pay the amounts to the FSCS in case it is forced to pay out compensation in order to keep down any potential bill on the industry.
