InvestmentsMay 19 2014

Morning Papers: Sipp complaints almost double

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Data from the Financial Ombudsman Service, to be published later this week, reveals that almost three quarters of the complaints stem from advice to invest life savings into unregulated and unsuitable investments. The Fos upheld 63 per cent of complaints, the Sunday Times said.

In March, FTAdviser revealed the regulator has told several Sipp firms to suspend supporting non-mainstream investments as it finalises its third thematic review in the sector. Many market commentators believe the review will lead enforcement action against providers.

The Financial Conduct Authority’s latest probe, alongside its long-awaited capital adequacy paper, is expected to be published at the end of June.

Two members of the Association of Member-directed Pension Schemes told FTAdviser the FCA had revealed during discussions that it continues to find failings within Sipp firms, especially relating to esoteric investments.

The complaints to Fos are more likely to be directed at the advisers who recommended their clients to invest in esoteric investments such as overseas property or biofuel projects, which are not covered by the industry compensation scheme.

The findings come as evidence mounts of growing dissatisfaction with Sipps firms among advisers. FTAdviser sister publication Financial Adviser’s service awards support the notion that advisers do not rate the service offered by Sipp providers.

Last year, Dentons Pensions was the only bespoke specialist Sipp provider to receive five stars for service and the only one to achieve more than three stars.

Of the other bespoke specialist Sipp providers: AtSipp, Rowanmoor, Suffolk Life and James Hay received three stars, while Hornbuckle Mitchell, London & Colonial and Barnett Waddingham all garnered just one star.

Carney warns over mortgage support

People could be stopped taking out mortgages worth many times their salary to buy new homes, the governor of the Bank of England has said.

According to the Telegraph, Mark Carney said in a televised interview yesterday that capping the size of mortgage ratios to salaries was one measure the bank was considering to controlling the housing market.

The bank is also keeping an eye on the government’s Help to Buy scheme – in which the government gives people taxpayers money to cover deposits on new homes worth up to £600,000 - following reports the scheme is fuelling house prices.

The warning comes after the bank disclosed in March that mortgages larger than four times borrowers’ incomes accounted for the “highest share of new home loans are running at their highest level than at any time since 2005”.

Mr Carney suggested that the bank could impose a new “affordability test” for borrowers as well as reining in the government’s Help to Buy scheme which provides taxpayer-backed guarantees for homebuyers.

Previously, three former chancellors of the Exchequer - Lord Lawson, Lord Lamont and Alistair Darling – warned the second phase of the Help to Buy scheme, which guarantees very high loan-to-value mortgages, has the “potential to inflate a future housing bubble”.

The second phase of the scheme, which opened early in October last year, guarantees a portion of mortgage losses for lenders that offer mortgages up to 95 per cent loan to value.

Recent data from the Royal Institution of Chartered Surveyors revealed that property sales are at a six-year high and the respected Halifax House Price Index showed an 8.5 per cent increase in April.

Co-op members support reform

The Co-operative Group’s interim chief executive has warned that it will take five years to stabilise the mutual even after members “voted unanimously to support wholesale reform of its failed governance structure”, the Telegraph reports.

Richard Pennycook confirmed the Co-op will prepare “sweeping governance reforms” after its members approved new principles to help the troubled mutual recover from its £2.5bn loss last year and the near-collapse of its banking arm.

The unanimous vote came after a scathing critique of the Co-op’s governance by Lord Myners, the former City minister who resigned as its senior independent director last month after just four months in the role

AstraZeneca rejects final £69bn offer

AstraZeneca has this morning rejected an improved £69bn takeover offer from Pfizer, “a bid which the US drugmaker declared to be its final offer for its its UK rival”, the Financial Times reports.

In a statement issued today (19 May), AstraZeneca said the £55 a share a bid, raised from £50 two weeks ago, undervalued the company and its “attractive prospects”.

Unless shareholders can convince AstraZeneca to reopen talks, “the rejection puts into jeopardy a deal that would be the largest foreign takeover of a UK company”.

According to the FT, AstraZeneca’s shares fell 13 per cent to £41.60 in opening trade in London.

Deutsche Bank launches €8bn rights issue

Deutsche Bank plans to raise €8bn (£6.5bn) as the Frankfurt-based bank attempts to mitigate fears over its capital strength, the Financial Times reports.

The bank is raising €6.3bn (£5.1bn) in a rights issue and a further €1.75bn (£1.4bn) directly from Paramount Services Holdings, the investment fund of the Qatari royal family.

“The extra capital is set to raise the lender’s common equity tier one ratio – a crucial measure of regulatory strength – from 9.5 per cent to 11.8 per cent”, the FT said.