Your IndustryMar 16 2018

Prudential splits and SimplyBiz floats: the week in news

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Prudential splits and SimplyBiz floats: the week in news

Just joking. The Spring Statement was so boring and uneventful, we've taken the executive decision to focus on more interesting stuff. For those with a grim interest in the details of the Spring Statement, have a look here.

1) Prudential does the splits

In possibly the least surprising financial news this week, insurance group Prudential finally announced it was splitting in two, together with a sale of its annuities book.

The move follows a widely trailed strategy of splitting the UK and European business, M&G Prudential, from its Asian, US and Africa businesses.

Investors will find themselves with shares in both businesses, while financial advisers were reassured that the group’s new "digital strategy" will not see adviser sales cannibalised by direct-to-consumer sales of the group’s funds and other investment products.

Although John Foley reiterated that the group will sell directly to consumers, he was also keen to point out that many of the company’s products were not suited to this, and that IFAs would still be an important channel.

2) SimplyBiz says we'll float too

Advisers may get share options in SimplyBiz when the compliance firm floats next month. The group will be valued at £130m on the Aim in April, with founder Ken Davy taking his family trust’s stake in the business down to just 40 per cent.

Joint chief executive Matt Timmins said that the IPO is the best way forward for growth, given that the group wants to remain independent rather than be acquired by a product provider. Davy, who is now 76, wants to spent a bit less time in the boardroom and a bit more time watching Huddersfield Town play Premier League football.

Further details on share options for advisers will be out soon, but it’s understood that totals will depend on how long firms have been members of the group. Watch this space.

3) The twist at the end of the movie

More bad news for film fans who invested in the now notorious Eclipse film schemes. HM Revenue & Customs has decided the loans investors took out to invest in the scheme would not be recognised as losses, meaning individual investors face being charged more in tax than they ever received in income.

There are 40 Eclipse schemes, and HMRC won a three-year battle over the Eclipse 35 film scheme used by celebrities and sports stars to avoid tax in 2016.

HMRC said it is committed to working "positively and empathetically to discuss affordable payment arrangements with anyone facing payment difficulties" following the ruling.

But Julia Norris, a partner at FS Legal, said the liabilities could be huge and that an investor committing £150,000 of their own money to an Eclipse scheme would have taken out a loan of around £4.5m.

They will have lost that £150,000 and will have to pay income tax at 45 per cent on the £4.5m, so someone investing £150,000 will now have to pay more than £2m to HMRC.

She also warned that even bankruptcy may not save them. That’s not a happy ending.

4) Bad week for the FOS

Finding yourself the subject of a Channel 4 Dispatches programme is rarely the key to a good week, and the Financial Ombudsman Service has been no exception to this rule.

The programme alleged some decisions may have not been fair to consumers, after Fos changed from a structure where adjudicators specialised in a product area and were assigned complaints in that area to one where the person who first receives the complaint will consider the complaint.

Thousands of cases could now be re-opened after the Personal Investment Management and Financial Advice Association called for an immediate independent review of past cases, while former pensions minister Ros Altmann said the scale of what she saw was "much worse than I would have imagined."

The Fos, for its part, said the documentary gave an "unfair impression" of the service.

5) Waspi leadership spat holds up legal case

The fighting over at Waspi continues as outgoing board members of the Women Against State Pensions Inequality (Waspi) campaign are threatening to hold up a legal case against the government over disputes about their successors.

Former directors have lodged a formal objection to the new leadership, which means a legal case brought by the group could now not go ahead.

It’s not the first infighting to be found amongst the Waspis, who are meant to be protesting against the unexpected increase in state pension age for women, rather than about each other. In August 2016 the group  split suddenly as the result of what ousted founding members called a  "meticulously planned military-style coup".