RegulationMar 16 2020

Your Shout: Letters to the editor

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This week...

HMRC wolves on the prowl

HM Revenue & Customs has realised there are many one-man businesses and self-employed they can bleed, both retrospectively and going forward (‘Chancellor’s IR35 promise sparks fresh outrage over review’, Feb 24). 

Local tax inspectors will no doubt have a wide-ranging remit to interpret the IR35 rules and it is unlikely there will be any clemency or humanity applied.

Considering it is the fee paying client who determines the status of the contractor, it will create confusion and mayhem among all involved.

A ‘confirmation of arrangement’ letter is only sticking plaster on a potentially infected wound.

With so many tax regulations open to interpretation, it is inevitable that many small business will be eaten up by the hungry, circling wolf pack that is HMRC.

Clive Fox

Retired IFA

 

DB market dwindling

Andrew Bailey says over the past two years around 370 companies have left the defined benefit transfer market, which is about 12 per cent of the market ‘370 companies exited DB market, Bailey tells MPs’, see page 17).

As a director of one of the 12 per cent, we do not use high-pressure tactics to secure DB business. Indeed, we do everything to discourage it.

When approached, we explain the regulatory position and that we charge even when the advice is not to transfer.  

Those that are left amount to one or two cases a year, but more often than not, none.  

Why have we left what is an intellectually interesting and challenging business?  

Last year, with the increase of Financial Ombudsman Service awards to £350,000, our insurance company, along with most of the others, took a stance against DB business that they see as high risk; limiting the number of cases we could carry out in any one year to four.  

This was not an issue to us as we have never taken on that many in a year.

In November when our renewal came through, we had a 287 per cent increase in basic premium and a doubling of the excess on all investment and pension business.  

This in turn has had a marked effect on the level of capital we have to hold.

I shopped around but could find no other professional indemnity insurance provider that was prepared to provide cover for our back book of DB pension work (at least our own insurer was providing that) and none that would provide ongoing DB transfer cover.  

We had no option but to give up our DB permissions. 

I am sure some of the companies have been forced by the Financial Conduct Authority to stop, but I suspect many more like us have had no option to stop because the rules state we must have appropriate PI cover.  

While some of the companies no longer offering the service may have given poor advice, it would be better journalism to investigate all 350 companies to find out what sort of advice they had been giving; how many cases a year; how they source the business; how many complaints and any regulatory concerns. 

Whether it is the regulator or politicians who have decided DB transfers are wrong, they can’t change the rules without changing the statutes.  

How else can the regulator stop the haemorrhaging of pension funds into the pockets of the pensioners?

Stuart Jefferies

Singular Financial Planning

 

Features of a Sipp

Your article regarding the Vanguard self-invested personal pension is timely as it coincides with the 30th anniversary of the launch of the very first Sipp in 1990 (‘Vanguard launches ‘low cost’ Sipp’ Feb 19).

Having been involved in the Sipp market in various capacities during all of those 30 years, I find it a little ironic that you should be writing about a Sipp that has the features of a personal pension, which Sipps were set up to avoid. 

The original Sipps were often marketed as an “unbundled” product where the operation of the pension was separated from investment management and administration –and the charges for each component were explicit – unlike personal pensions.

Of course the world has moved on and Sipps have been tarnished through the well-documented activities involving esoteric and inappropriate investments. 

When regulation caught up with Sipps in 2006 it was introduced in an ill-prepared fashion and the then FSA, and now FCA, has been playing catch up ever since.

It arguably failed miserably over the crucial period of 2009-12 when the majority of Sipp scams and forays into non-standard investments occurred. The industry is still paying the price for these failings through the Financial Services Compensation Scheme.  

The packaged product approach has always suited the regulator – as has a marketplace with a few large providers. 

No surprise then that the bundled approach is seeing a resurgence. In 30 years the product lifecycle has gone full circle. 

Whether you view that as good news or bad depends on how much you believe in the merits of freedom of choice as opposed to “collectivism”. I nailed my colours to the Sipp mast 30 years ago.     

In his 1989 Budget, Nigel Lawson – acknowledged as the architect of Sipps – said he wanted to give individuals a degree of investment choice and a direct say as to the specific investments to be held and when they should be bought and sold. 

He made no reference to simplicity or low costs. I find it hard to see how the Vanguard product can be called a Sipp – but if it meets a need and delivers what it promises, does it matter? 

John Moret

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