The coming year is set to be another big year for financial services.
Many of the big providers will start the year having had their internal models approved under Solvency II, and Europe will continue to occupy the minds of many as the focus increases on the Capital Markets Union and continued attempts to harmonise financial products that can be transferred easily from one country to another.
In practice, any pan-European pensions product is likely to remain a long term aim.
Closer to home, there are really two big decisions to be made for financial services; how to redesign pensions tax relief in a way that incentivises savers and saves money for government, and how to shape advice provision for the future. Neither of these issues will be straightforward.
On tax relief, it seems inevitable that we will see change, or at least the announcement of the intent to change. With such a major review completed in 2015, few would disagree with that. The tricky balance is of course how to find a way of making it sufficiently attractive that it remains the underpin for automatic enrolment (i.e. it makes sense for all but a wealthy few to be in a workplace pension) but at the same time curtail the costs to Treasury.
After much heated debate about a ‘TEE’ model, most of the attention now seems to be on a flat rate incentive, whereby people on basic rate tax may get a greater uplift, in favour of those on higher or additional Rate. Salary sacrifice will remain in the cross-hairs, and if it is indeed to be removed, it would seem sensible to do this before another 1.8m employers consider using it for the first time.
It seems likely we’ll hear in the Budget Statement in March, one way or another.
The Financial Advice Market Review has been an area of intense debate in the closing months of 2015 and I suspect will continue long into the first quarter of 2016. While not solely about long term saving and pensions, the flexibility for people that came with freedom and choice has undoubtedly exposed many more people to the need for advice, albeit with smaller assets.
Arguably, any ‘advice gap’ in this regard has been there since the Retail Distribution Review (RDR), as advisers have understandably moved up market, but has only really been tested over the last few months.
It seems likely that much of the focus will be on how advice – and guidance – can be delivered more cost effectively to that segment of the market, i.e. those with retirement funds big enough to prompt the need for advice, but smaller than advisers would ordinarily deal with. Naturally, technology will come to the fore and we may once and for all start to define what ‘robo-advice’ actually is.