RegulationMay 20 2016

More MMR, pension policy and Sipps: the week in news

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More MMR, pension policy and Sipps: the week in news

Responsible lending reviews, pension legislation reassessments and more work for the ombudsman were among the biggest themes this week.

For a top-level round-up of what happened this week in the adviser industry, look no further:

1. Mortgage Market Review 2.0

On Monday, the Financial Conduct Authority dropped the results of both its call for input and responsible lending review, giving the industry fairly good marks on its clean-up since the MMR, but also opening the door for more consultation.

Sometime towards the end of the year, the intermediary side of the market will have to face questions on what its rise to dominance really means for borrowers and how the proliferation of technology can guide them to the right deals.

The FCA’s director of competition Deborah Jones also warned plans are underway to crack down on “the web of relationships” that exists within lender panels and mortgage sourcing systems, which risk “conflicts of interest or misaligned incentives”.

The Association of Mortgage Intermediaries’ chief executive Robert Sinclair hit back at the regulator, pleading for the “fragile” sector to be left alone for once.

2. Pensions policy in the spotlight

Yesterday, FTAdviser revealed plans for a radical new bill, which could see defined benefit pension scheme members face cuts to their promised retirement incomes, according to Work and Pensions committee chairman Frank Field.

He argued many final salary schemes may never meet their liabilities, and must adjust them to more realistic levels, with the Labour MP promising a “mega bill” to deal with DB deficits, alongside policies to prevent companies paying out dividends at the expense of their employees’ pension schemes; reacting to the recent BHS debacle.

Meanwhile, a Freedom of Information Act request from FTAdviser shed new light on how changes in adviser population over the last decade have impacted the industry’s readiness for government pension legislation.The figures showed three-quarters of advisers have left since A-Day’s pensions simplification regime came into force in April 2006.

One of the biggest problems since last April raised its ugly head again this week, as an adviser raised TCF concerns about the charges levied by closed book life company Phoenix Life on scheme members trying to transfer their pots out to take advantage of the at-retirement reforms.

3. Ombudsman stands firm

Onto another pensions problem, with the Pensions Ombudsman cementing its position that Sipp providers should not be expected to carry out comprehensive due diligence on pension investments.

Ombudsman Anthony Arter found in favour of Stadia Trustees in a complaint, deciding it was not their role to undertake the level of due diligence suggested, reflecting a previous decision where he controversially ruled it was not Berkeley Burke’s responsibility to conduct extensive investigations into the suitability of investments.

Meanwhile, over at the Financial Ombudsman Service, a decision saw an adviser criticised for recommending a client with a cautious attitude to risk put £210,477 of their pension savings into the unregulated New Earth Solutions Recycling fund, via his Sipp.

“There was an over concentration of a single (unregulated) fund which went against the usual principles of diversification,” noted ombudsman Adrian Hudson.

4. Levy blow

An unidentified adviser who demanded the FCA refund an increase in the Financial Services Compensation Scheme levy because they couldn’t afford the charge, had their complaint rejected this week.

Reflecting the feelings of many in the industry, they wrote to the regulator saying the fees and levies allocation system was not fit for purpose and was in need of radical reform.

Complaints commissioner Antony Townsend responded: “In my view, the matters you raised with the FCA - quite legitimately - were really a contribution to the debate on the FCA’s policies, rather than a complaint suitable for the Complaints Scheme, and it might have been better for the FCA to have treated them in that way.”

Another move sure to enrage some IFAs saw the City watchdog confirm it does not support advisers’ claims that networks which chase them for costs incurred in compensating their clients are avoiding a statutory rule.

Advocacy group the IFA Defence Union had accused some networks of trying to escape their responsibilities by using “flawed” contracts to pursue advisers for unsuitable advice they had previously signed off.

However, a person familiar with the FCA’s thinking said it does not back this view, instead prioritising consumer protection over the relationship between principals and appointed representatives.

5. Enough already

With almost a month to go now until Britain votes on its membership of the EU, those on either side of the debate are really firing up the rhetoric.

This week saw SimplyBiz founder Ken Davy put his name alongside more than 300 business men and women calling for Britain to leave, while many in the property market warned uncertainty around the referendum could keep house prices subdued for a few more months.