George Osbone’s economic address was not quite as epoch-defining as last year’s - some in the pensions market might say, thank goodness - but the Budget did provide a few tasty morsels that will kick off the campaign proper in the run up to May.
Here are FTAdviser’s five key points from the last seven days of news:
1. Quartet of savings plans - and one raid.
Towards the end of his speech, the chancellor laid out some new ideas to get the nation saving more, chief among them being a couple of Isa developments: one giving more flexibility and the other aimed at first-time buyers.
The latter was subsequently torn into by estate agents, who argued that won’t be able to help those struggling for the first rung of the property ladder if rising property prices mean there are still a dearth of affordable homes to buy.
But while he gave with one hand Mr Osborne took away with another, capping the amount people can save into their pensions. The decision to reduce the pension lifetime allowance from £1.25m to £1m from April 2016 in order to increase relief costs was decried by many in the industry.
While economic secretary to the Treasury Andrea Leadsom pointed out that the median pension pot is £78,000 and only about 4 per cent of people have more than £1m, Barnett Waddingham senior consultant Malcolm McLean said it’ll reduce a future pension to little more than £27,000.
2. Annuity for cash plans confirmed.
The plight of ‘trapped’ savers had been a major cause for consternation post-Budget, while this plan to extend to them last year’s freedoms had also been trailed for long enough to let commentators really consider their barrage of carefully-worded press releases.
For what it’s worth, the majority of pension professionals are warning of potential consumer detriment should the second hand annuity market proposals ever come to pass. Some life companies, expecially annuity specialists, are conversely intrigued by the potential.
Crucially, the government laid out the various hurdles that must be overcome in its official plan for the policy, one of which being that those wishing to sell their guarantees may be compelled to take independent financial advice to prevent another mis-selling scandal.
By Thursday, FTAdviser reported on one advice firm that has already been fielding calls of interest from the public, confirming expected demand but reciting concerns that those most desperate to cash in their policies would be most at risk of getting a bad deal.
3. Sipps celebrate 25 years with ‘bad advice’ fines.
A landmark for the self-invested pension sector was marred this week, as no sooner had FTAdviser’s sister title Money Management wished them a happy 25th birthday, than the Financial Services Compensation Scheme hit pensions intermediaries with a £20m interim levy over ‘bad’ advice on Sipp transfers.
FSCS chief executive Mark Neale commented that the industry must learn from these “cautionary lessons” ahead of next month’s at-retirement reforms, which the Association of British Insurers’ director of advocacy Louise Hanson this week predicted will create an “open season” for scammers.
A grim end to the week was confirmed when the FCA banned two former directors of advice firm Tailormade Independent for putting £112m of client money into high-risk investments via Sipps.
These are the problem investments: esoteric, high-risk, opaque investments that offer stellar returns for those transferring pension cash to invest via a self-invested wrapper. Invariably lots of clients lose money.
In the case of Tailormade the underlying investments in question were the controversial Harlequin overseas hotels, on which the FSCS has already started paying out.
4. Buy-to-let bucks trend, but fears for pensioners grow.
Many more people are buying, renovating and letting properties up and down the country. Data from the Council of Mortgage Lenders earlier this week found £2.5bn of loans were made in January, up 14 per cent on the same period in 2014 and bucking a general downward trend.
At the same time, more weight was added to the previously-reported trend for retirees looking towards buying investment properties with the pension pots come the 6 April freedoms. Property portal Rightmove pointed out that the consequence of buy-to-let investors cashing in to raise larger deposits will be prices being driven up further at the low end of the market.
Lloyds Bank’s chief investment officer Markus Stadlmann noted that pensioners seeking to liberate their cash for property investment could be hit by falling yields, as slowing growth in property price inflation would likely persist.
5. Foreigners won’t get the freedoms after all.
Finally, something that was less widely reported this week, was an announcement from HM Revenue and Customs that overseas pension schemes holding UK tax-relieved savings outside the European Union will be prevented from offering pension freedoms.
The update represents a government U-turn over a rule that requires the majority of a fund to be ringfenced to provide an “income for life”.
HMRC had initially consulted last year on plans to extend full freedoms to qualifying recognised overseas pension schemes without losing that status, but a new statutory instrument revealed a stay of execution for a Qrops’ key requirement to designate at least 70 per cent of an individual’s transferred pension to provide an income for life.
peter.walker@ft.com
