Ban fund-based charging
When it comes to the planned contingent charging ban, in my opinion the elephant in the room is fund-based charging (the most widespread charging practice used by independent financial advisers). If defined benefit transfer advice, initial and ongoing, was conducted using a time-based approach, for example, charged by the hour, then the risk of miss-selling should drastically reduce.
In fact, if you applied time-based charging to all advice, mis-selling overall should dramatically reduce.
So rather than banning contingent charging, perhaps the Financial Conduct Authority should consider banning fund-based charging.
Simon Torry
SRC Wealth Management
Hands off our pensions
Nigel Peaple of the Pensions and Lifetime Savings Association recently said that pension freedoms should be scrapped. I could not disagree more, likewise my staff and clients.
My colleagues are sophisticated individuals who know their jobs. They also know how many beans make five. Not one would buy an annuity out of choice. If I were the most cautious individual on the planet, I still would not buy an annuity; I would find the lowest-charged drawdown vehicle and stick my money on deposit before I would hand it to an insurance company.
We do still write annuities for some clients, but I write every one with a heavy heart.
Invariably they are for unsophisticated old ladies with small funds living on a tight budget who need absolute certainty as to what their income will be. For everyone else, annuities are a non-starter.
A 65-year-old gets microscopically more than 5 per cent from an annuity. Add a spouse’s pension and that rate heads further south. You need to live at least 20 years to get your money back, but, statistically, the chances are you are dead by age 88.
If you are lucky you might make a theoretical profit out of the deal, but inflation, even limited to the Bank of England target rate, says you never will. And before anyone says, ‘What about enhancements?’ the reality is that impaired life rates are pathetic for all but deathbed cases.
Pension freedoms and the end of compulsory annuitisation have made it much easier to persuade people to save into pension plans.
Indeed, I only started stuffing my own pension when George Osborne made his famous pronouncement that “nobody will be forced to buy an annuity”.
Insurers long for the old days of forced annuitisation. It was a cartel in all but name. They got away with it and got fat on it for decades.
I will fight Mr Osborne on Brexit every day, but I will happily buy him a pint every day for the rest of his life for freeing me and my clients from the compulsion to fatten the insurers.
I understand that paternalism goes with the job when you work for the PLSA, but the world has moved on.
Sorry, Mr Peaple, we are big boys and girls and we can manage our own pension funds.
You have got half a point at least where DB pensions are concerned, but with defined contribution pensions, forget it. Hands off, you are having a laugh.
Neil Liversidge
West Riding Personal Financial Solutions
‘Shameful’ IR35 situation
Regarding your article on TV presenter Helen Fospero (November 7). As a contractor myself for the past nine years, I thought it would be worth sharing my own views on the shameful HM Revenue & Customs IR35 situation.
The latest approach is forcing those companies who utilise contract resource to scale up and down at will to take a blanket approach to not employing limited company workers.
This is going to have a massive impact on cash flow for companies like mine, as many companies have stopped taking on resources as they wait to see how the market responds.
There are differences between myself as a contractor and a typical employee. These include:
• a difference in the number of working hours – 40 plus for contractors versus 36.5;
• enforced Christmas breaks – sometimes for two or three weeks, and then on occasion it has been extended to six weeks;
• enforced summer break notifications as and when the client decides they want no support;
• rates can be cut mid-way through a delivery, and if not accepted I can be told to leave;
• no staff perks;
• no internal reviews and no task-setting;
• no client-paid jollies and there are different internal processes for contractors.
I work on different projects in different locations and dishonesty from management happens all the time.
I cannot tell you how many recruiters I have spoken to who struggle to recruit for IR35roles since this came into the public sector.
Look at it this way, being in business myself, why would I want to be taxed as an employee without any of the above benefits, and not be able to claim my standard business expenses that every other limited company is able to claim? Who would I actually be working for here, myself or the government?
Name and address supplied
Detrimental regulation
Regarding the article: FCA warned of £25bn harm in DB transfer scare (November 12).
Advisers are feeling obliged to advise clients not to transfer from their scheme just because of the FCA key performance indicators and fear of losing their business due to having no professional indemnity insurance.
Clients need individual advice from knowledgeable, unconflicted advisers who do not need to focus on anything other than what is best for that client and their life plans – the current position is so detrimental and we have to get a more balanced view on the merits of pension plans.
Jane Hodges
Money Honey
