But figures show the economy has already taken an unprecedented hit from the pandemic. In April, GDP fell 20.4 per cent — the fastest contraction since records began.
The industry had other news to be concerned with this week however, as Quilter and Friends Provident were in hot water over a hefty misselling claim while warning bells were sounded over ongoing adviser charges and the new divorce bill. It’s time for the week in news.
1 Providers in court
Expats launched a multi-million pound claim against Quilter International and Friends Provident this week, alleging they were missold high-risk funds through the guise of insurance wrappers.
According to the claimants, Old Mutual (now QI) and Friends Provident’s offshore Isle of Man subsidiaries sold ‘portfolio bonds’ or ‘insurance bonds’ which were in fact unit-linked and held high risk assets inappropriate for non-sophisticated investors.
Quilter denied any wrongdoing and said it would “robustly defend the claims”. Friends Provident Life has yet to respond to a request for comment.
2 End of ongoing fees
The regulator’s renewed salvo against conflicts of interest in the pension advice market could result in a crackdown on ongoing advice fees, commentators warned this week.
After the Financial Conduct Authority moved to finalise its ban on contingent charging in defined benefit transfers last week, some have predicted its action could be mirrored elsewhere in the market — especially ongoing fees.
The watchdog has previously flagged concerns over incentives within pensions advice and is set to review initial and ongoing advice to consumers in its Assessing Suitability Review 2.
3 Triple lock in jeopardy
Experts warned the pensions triple lock would “have to go” in its current form next year as average earnings are expected to jump following a lull caused by the pandemic.
Torsten Bell, chief executive of think tank the Resolution Foundation, told MPs at a Treasury select committee that although average earnings would fall by 7.3 per cent this year, next year they would likely see a jump of about 18 per cent.
Following the current triple lock rules, this would mean the state pension would need to increase by nearly a fifth — Mr Bell said there was little chance the government would make such a move, so the lock would have to be amended.
4 Divorce bill downsides
Warning bells were sounded over women facing financial vulnerability if rushed divorces were to spike during the virus crisis as new “no fault” rules moved closer to becoming law.
The Divorce, Dissolution and Separation Bill, which cleared its second reading in the House of Commons this week, would only require couples to provide a statement of irretrievable breakdown to void their marriage.
But advice giant Quilter warned the rules may trigger “DIY divorces” without proper advice, leaving women particularly exposed to financial struggles in retirement.
5 Mortgage mayhem
Lenders put a halt to lending to borrowers with small deposits this week, unusually claiming “unprecedented demand” had prompted the move.
Accord Mortgages, Clydesdale Bank and Virgin Money temporarily withdrew their 90 per cent loan-to-value products. The lenders said this was to “manage demand and reduce impact to service” as they had seen a “significant increase” in applications.
The move represented a u-turn after lenders reintroduced higher LTV lending last month, having previously stopped such lending due to the coronavirus crisis.
imogen.tew@ft.com
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