This week’s news was dominated by pricing and charges, particularly in terms of providers rushing to get propositions ready in time for the pension freedoms from 6 April.
Mortgage regulations, defined benefit transfers and adviser industry numbers also cropped up on more than one occasion, so as is traditional, here is our round-up of the five key themes:
1. The Russian roulette of at-retirement charging.
Not that we’re counting down the days, but it’s now less than seven weeks to go until the most substantial reform of pensions tax and access rules in a generation, which is all the more worrying when you realise how little is still known about what the various new options will actually cost.
FTAdviser - more specifically Donia O’Loughlin - took it upon herself to pester providers for their charges come April, revealing that only a handful have so far produced more than a vague indication of fees for flexible drawdown and ad hoc lump sums.
Understandably, advisers were less than impressed, with Lowland Financial managing director Graeme Mitchell accusing insurers of “playing a game of Russian roulette” in not wanting to be the first one to reveal their full pricing structure.
A couple of days later, a bit more blood had been squeezed out of various stones, with many providers saying they will reveal their pricing in line with their 30-day change disclosure obligation at the beginning of March, while a handful of respondents to FTAdviser’s investigation gave the first hints of what models may look like.
2. Fees still have the power to enrage.
Self-invested pension provider Hornbuckle’s transparent but lengthy fee schedule document showed that it is in the industry minority by levying a £50 charge on clients seeking to change the financial adviser attached to their Sipp.
Cue consternation from rival providers and another example of the damage that can be done by inexplicable costs put upon customers.
Hargreaves Lansdown managed to dodge too much criticism by throwing its latest levy into an already busy mixer on Wednesday, with clients facing an exit fee of £295 plus VAT if they open a an account post-April and then withdraw all their funds within the first 12 months under the new pension freedoms.
3. IFA industry vampire needs new blood.
The issue of demographics cropped up again with regards to the adviser industry, as various participants mulled problems with image, regulation and qualifications that potentially put off graduates from becoming IFAs.
The issue is becoming ever more pressing due to the widening of the advice gap brought about by the pension reforms, with Bower Retirement Services suggesting that double the number (800) of equity release advisers will be needed to cope with increased demand over the next five years.
4. Mortgage market regulation raises its head again.
Mortgage industry bodies flexed their muscles this week, refocusing on issues that seem to have been rumbling along now for quite some time.
This morning, the Council of Mortgage Lenders reminded lenders of the need to communicate with those in their legacy interest-only book ahead of eventual interest rate rises, with most dutifully confirming that they already have strategies in place to cope with the challenge.
Meanwhile, the Intermediary Mortgage Lenders Association’s executive director Peter Williams was more forthright, arguing that excessive regulation is moving the UK towards a “state-regulated” mortgage market, as rising costs and constraints disenfranchise swaths of consumers.
“I think we all support proper definition of the boundaries around mortgage lending, but we’re becoming over-regulated and there’s a risk of tightening that boundary line more than was ever intended,” he stated.
Lenders have already started responding to one area of regulation, with both The Melton and Ipswich Building Society now considering mortgage applications from borrowers under the Mortgage Market Review transitional arrangements rules, in response to demand from borrowers who have become ‘prisoners’ trapped on their current mortgage deal.
5. Sense may be prevailing with DB transfers.
Those lucky enough to have build up a few decades worth of defined benefit pension funds are becoming savvier with their investments, once they’ve decided to take the money.
Data from Selectapension showed that the number of advisers selecting specific funds rather than using a default option when reviewing DB transfers has increased by almost 200 per cent, with even more choosing to use discretionary fund managers.
This comes a week after The Pensions Regulator warned trustees of final salary schemes that they must not seek to stand in the way of members giving up guaranteed benefits to take advantage of pension freedoms, citing the potential for a spate of transfer requests when new rules come into force.
peter.walker@ft.com
