Adviser news round up
Personal accounts dominated the news in August as the Government announced that its research into the effect of means testing on personal accounts showed that individuals with less than 20 years until retirement in 2012 and earning up to £25,000, will see hardly any benefit from personal accounts.
Individuals in these circumstances would see returns of between only 1-3 per cent greater than if they did not save in the scheme. Someone on £10,000 a year, after 20 years of auto-enrolment in a personal account, paying 4 per cent of earnings each month, would be only £2 better off a week, according to the DWP figures.
Industry experts seized on the figures as proof that low earners in this position would be better off saving in an ISA, savings gateway or simply paying off debt rather than being automatically opted into Government’s new flagship scheme which is due to start in 2012.
Scottish Life, head of pensions, Steve Bee said that improving the basic state pension would be a far more cost efficient way of achieving a decent replacement rate of 84 per cent, than personal accounts which might provide a replacement rate of 92 per cent, but at a cost of savings over 40 years.
Standard Life’s John Lawson attacked the DWP for abandoning its discussions with pension providers about an acceptable quality test for existing pension schemes in 2012, but a spokesperson for Aegon insisted that the talks were ongoing.
The solution put forward by a number of trade bodies, including the Association of British Insurers, would have allowed employers to certify that the majority of their employees would be as well, or better off, under their existing pension arrangements than they would be in personal accounts.
Such a test would allow schemes to continue using their existing definitions of pensionable earnings and would only require companies to review their pension arrangements against personal accounts every three years.
Failure to agree would mean that employers would have to measure contributions to their existing schemes against what would be required under personal accounts, and in the event of a shortfall, reconcile any differences through top-up payments.
There was also concern over the future of Qrops in the wake of HMRC striking off three Singaporean Qrops from its permitted list and some expatriate advisers warned of a potential mis-selling scandal.
Elsewhere, the FSA is to delay publication of its feedback report on the RDR discussion paper until November 2008 (previously due in October) to allow its recently appointed MD of retail markets, Jon Pain, to settle into his new role.
Following the upsurge in cases of mortgage fraud, the FSA said it is considering regulating every individual mortgage broker and making all IFAs giving mortgage advice subject a separate approved person status for mortgages.
The extra cost of bank regulation in the wake of the Northern Rock debacle means that the FSA might exceed its budget this year and the industry could face fee rises in 2009 and 2010.
The ‘treating customers fairly’ regime came under attack from Nick Prettejohn, chairman of the Financial Services Practitioner Panel, who said it was taking up too much of the FSA’s resources.
Elsewhere, a Standard Life survey showed that nearly 70 per cent of advisers believe they can achieve a diploma standard qualification within three years and 83 per cent within five years.
In a sign that investors are diversifying their investments, the IMA said nearly half of total net return fund sales in Q2 2008 were attributable to fund of funds, while tracker funds saw a net outflow of £700,000.
Norwich Union said it is looking to enter the variable annuity market, following similar announcements from AXA and Standard Life.
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