Your IndustryOct 20 2017

Inflation highs and data lows: the week in news

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Inflation highs and data lows: the week in news

This week we learned the government plans to have us dig for Britain if it all goes south during the Brexit negotiations.

In anticipation of our gradual descent into an economy based on subsistence agriculture and bartering, let us draw together around the fire and reflect on the week in news.

1) Data dump

This week the Financial Conduct Authority assaulted the financial services industry with a document containing 200 pages of cold, hard numbers.

After interviewing 13,000 people it published the results, showing how “normal people” interact with financial services – or not, as now seems more appropriate.

Among the findings was the fact that at least 1.3m people claim they were mis-sold a pension or investment product by a financial adviser.

This means 13 per cent of those who received regulated advice in the past year have, recently or in the past, been mis‑sold a product.

The report also demonstrated some people have a very loose grasp on how products work.

One in 10 of those aged between 55 and 64 were under the impression income drawdown would provide them with a guaranteed income for life - which it does not - and just 42 per cent knew drawdown - in which the retirement fund remains invested to provide an income -  would mean a risk of the value of their fund going down.

A quarter of people who have accessed a defined contribution pension in the past two years do not know how they did so.

2) He’s making a list, he’s checking it twice…

It’s a little early to be thinking about Santa Clause, but someone who is thinking about who has been naughty and who has been nice is Chancellor of the Exchequer Philip Hammond.

In about a month he will have to deliver a Budget, which means speculation is already rife about what will be in it.

Among the goodies Mr Hammond is reportedly considering is a cut to stamp duty for first-time buyers.

The plan could result in big savings for young families struggling to get on the housing ladder, particularly in areas such as London.

But while the move may help to ease the burden on young buyers, there are fears that without an increase in supply it could simply boost house prices even further.

Another potential idea – cutting pension tax relief for older workers to fund tax cuts for the young – has not proved overwhelmingly popular either.

3) Three is a magic number

Bad news for those people hoarding their money under their mattress: they’ve just got a bit poorer.

This week it was announced that the consumer price index rate of inflation had increased to 3 per cent – its highest level since April 2012.

The news was a blow to workers who according to official figures continue to suffer stagnant wages.

But those smug baby boomers have won out again, with their inflation-linked pensions.

The pensions lifetime allowance will also increase by £30,000 from April 2018 as a result.

This is because the government announced at Budget 2015 that it would reduce the lifetime allowance for pension savings from £1.25m to £1m from April 2016, but that from 2018-2019, the allowance will be increased by inflation, the consumer prices index.

4) The strange case of the non-existent consumer

This is not a long-lost Sherlock Holmes mystery, but something the FCA has been grappling with this week.

The regulator has criticised products and services which are too often designed for “average” consumers which may not actually exist.

Linda Woodall, director of life insurance and financial advice at the FCA, said the regulator also found instances where a firm’s policies and processes were designed around its needs rather than those of its customers.

She was speaking at the launch event of the FCA’s occasional paper on the ageing population.

5) Final curtain for final salary

The woes of defined benefit pension schemes have been continuing this week.

MPs are pressing the owners of Tata steel for assurances 130,000 British Steel workers will not lose retirement benefits after it has emerged the pension regulator will not craft rules to safeguard them.

In August, Tata got the go-ahead to offload the British Steel Pension Scheme and create a new DB fund, after the regulator gave its formal approval to a regulated apportionment arrangement.

Meanwhile the University and College Union has voted to go on strike over concerns about the £12.6bn deficit at the Universities Superannuation Scheme.

Capita staff will be taking nine continuous days of strike action after talks about transferring workers from the current DB scheme to a defined contribution plan broke down.

damian.fantato@ft.com