InvestmentsAug 9 2019

Taper trouble and lost pension found: the week in news

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Taper trouble and lost pension found: the week in news

But in financial services things were more decisive.  

The government announced it would review the allowance taper and a couple of firms were in hot water as the Financial Conduct Authority told a wealth manager to cease regulated activities and a short-seller accused an investment firm of misrepresenting returns.

It's time for the week in news.

1 A (ninth) week of Woodford woes

Neil Woodford’s stricken Equity Income fund experienced another bump in the road this week as short-seller Muddy Waters revealed it was betting against one of the largest investments in the flagship fund.

Muddy Waters questioned the accounting standards of Burford Capital — a business which Woodford owned 20.7m shares in — and accused the firm of “egregiously” misrepresenting its returns in recent years.

The share price of Burford Capital (a £2.2bn UK-listed business involved in litigation finance) fell from about £13 to £4.10 on the day this emerged, but it has today (August 9) bounced back slightly to £8.10.

It is also worth noting Mr Woodford will have still made a profit on his fund’s 9.5 per cent stake in the business, having bought the shares when they were trading at £1.20.

Fund giant Invesco is also involved in the debacle as Muddy Waters accused Mark Barnett, who runs an Invesco fund which is the largest investor in Burford Capital, of “bailing out” the firm after one of its investments went wrong.

Invesco refuted the allegations.

2 Whopping charges

A wealth management firm, which entered special administration this week after the FCA had 'serious concerns' about the way it was operating, was charging fees as high as 20 per cent, it has emerged.

The regulator intervened at SVS Securities PLC after it received a tip-off and consequently told the wealth manager to cease all regulated activity.

The FCA found it was targeting IFAs to promote its model portfolios to clients after a DB transfer or Sipp switch, but the proportion of illiquid and high-risk bonds was unlikely to match such clients' needs.

It was also concerned some customers had been charged a series of high fees and commissions, in some cases amounting to as much as 20 per cent of the total investment

The FSCS said it was working closely with the administrators to determine SVS's position in respect to client money, but confirmed it would cover assets and client money shortfalls if the business didn't have the funds.

3 Lost pension found

A retiree received a windfall pension payment of £133,000 after a chance conversation with an adviser led him to a state pension pot he didn't know existed.

Peter Williams, 76, spoke to an equity release adviser about releasing funds from his property as his two workplace pensions (worth £234 and £275 a month respectively) did not provide enough money to make ends meet.

The adviser, from Responsible Life, found he had not received a penny from his state pension.

Mr Williams had assumed he was not eligible when the government had not contacted him after he filled out his pension forms.

After contacting the claims line, the adviser found he was entitled to £274 a week plus £132,800 for all the unclaimed years.

4 Please sir, do you have more assets?

Fewer and fewer advisers are willing to service clients with less than £100,000 in investable assets because they simply cannot afford to do so.

Research from Canada Life showed only 16 per cent of advisers thought clients with less than £100,000 of assets were a viable option for them.

The firm warned this was a stark contrast to research undertaken in 2014 when 50 per cent of advisers would be willing to advise in this remit, which meant one third of advisers had left that area of the market in five years.

Concerns were raised this could create a 'lost generation' of potential clients for whom it's unnatural to phone an adviser or create a comprehensive financial plan.

Meanwhile Lloyds Bank announced a move into this space this week with a mass market robo-advice offering for clients with assets under this amount.

The service will be available to Lloyds and Halifax customers and is part of the group's new initiatives in the online space.

5 Scrap the taper

In an awaited announcement and months after the doctors pensions row first hit the headlines, the government stated it would review the impact of the tapered annual allowance for public sector workers.

The Treasury and the health department also said the government wanted to allow doctors to set their level of pension accruals themselves at the start of each year.

Under this rule change senior clinicians can set any percentage for contributions and accrual rate, in 10 per cent increments, depending on their financial situation.

It is hoped this will mitigate the problems caused by the tapered allowance, which gradually reduces the allowance for those on high incomes.

The system led to doctors opting out of extra shifts to avoid high tax bills.

The government has since been urged to stop "pensions policy whack-a-mole" and rethink the whole pension tax system, instead of just the tapered allowance.

imogen.tew@ft.com

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