Category: Financial News

The new game in town: Govt reshuffle triggers new era of pensions policy

The new Government top team is set to further cement the Treasury’s all-powerful position as the organisation driving financial services and pensions policy.

Prime Minister Theresa May has lost no time following her appointment in clearing out David Cameron’s allies, notably George Osborne as Chancellor and Ros Altmann as pensions minister.

Now that we know the shape of the new Government, it is worth examining who are the people at the top of Government, and the kind of policies financial services firms should expect from them.

Osborne’s pet projects such as the Lifetime Isa, pension tax relief reform and the creation of the secondary annuities market all hang in the balance.

There is also the question of whether we will see a snap election, as well as whether these are the right people to negotiate the best terms possible for the financial services industry as we agree our exit from the European Union.

The senior team in Government represents a radical departure from the Cameron/Osborne era, and signals huge implications for the UK’s pensions and tax policy over the coming years.

Osborne vs Hammond

As the new Chancellor, Philip Hammond is expected to take a very different approach to the “rabbit out of a hat” attitude financial services came to expect from Osborne.

Cicero Group executive chairman Iain Anderson says: “Hammond is cool, calm and collected. A very detail orientated and thoughtful person. Osborne liked to have the big canvas, the big policy and the big surprise. Financial services policy is going to be a lot more thought through, with fewer surprises and more consultation.”

Anderson does not expect to see pension freedoms changed or added to. But he forecasts May’s mantra of a “Government for everyone” will be translated into attacks on executive pay and the pensions of higher earners, alongside a greater focus on what works for “Middle Britain”, for example through changes to auto-enrolment.

Lansons director Ralph Jackson says pension saving has been transformed over recent years, but questions whether savers have ultimately benefited.

He says: “Osborne has clearly been a reforming chancellor, and he has had to steer the economy through incredibly difficult times, with the focus on deficit reduction at the heart of that. He has been bold through pension freedoms, and also tried to innovate with tax and pensions policy.”

But Jackson admits the former chancellor’s approach to driving through reform such as pension freedoms without always consulting the industry has not won him many friends.

He says: “Osborne was never particularly inclusive in the way he managed the economy. For the bigger opportunities like the Budget or the Autumn Statement, he tried to pull something out of the hat to generate some form of good news for savers who were struggling, and others had to pay for that.

“But by and large, the economy has come through a difficult period. He was a reforming chancellor, but not one who was easily liked by many people.”

Anderson adds May has been definitive in saying Osborne’s economic policy has not worked for everyone. He suggests the new Prime Minister may look to make a “clean break”, and innovate beyond simply coping with Brexit. He believes one of the things that could come under scrutiny is whether the current “twin peaks” set-up of regulation between the FCA and the Bank of England is the right one.

What comes off the table?

In the wake of a Government reshuffle, and with resources diverted to developing a strategy on Brexit, existing pension policy initiatives have been called into question.

Former pensions minister Ros Altmann, who left the Government last week, has already come out fighting. As Money Marketing reported earlier this week, Altmann wants to see Osborne’s flagship Lifetime Isa product scrapped on the basis it discourages adequate pension saving.

Jackson says: “May and Hammond’s focus is going to be on economic stability. The Autumn Statement will be important as a means of achieving this, and will be different to the one Osborne would have delivered.”

He says initiatives such as the Lifetime Isa, pension tax relief and secondary annuities may not see the light of day.

He says: “All of those things are always up for review any time there’s a new team in place. The key issue in the Department for Work and Pensions will be whether or not things like secondary annuities or pension tax relief reform are still appropriate when looking at the bigger picture.”

But former pensions minister Steve Webb believes the Government will continue to be wedded to at least some of those big ideas.

Webb, now director of policy at Royal London, says: “There’s a sense of the Government wanting to be seen to be doing things. The risk is if all you’ve got is Brexit and austerity, that’s a pretty meagre programme. Stuff that has already been announced and is in motion has the best chance of still happening.

“The Lifetime Isa is likely to be quite popular, and coming from the Foreign Office Hammond may not be coming in with profound views on tax policy. The civil service has also had a pro-Isa world view for at least six years. There is a lot of momentum there.”

He argues while the Lifetime Isa costs money, it would be quite early on for the Treasury to reverse that.

Webb also points out secondary annuities are expected to raise money for the Exchequer, and says he would be surprised if this initiative was shelved at this point.

The role of the Treasury

Under Osborne, the relationship between the Treasury, the FCA and the DWP was that it was the Treasury deciding the direction of travel on financial services policy. Jackson expects this to continue, with the Treasury likely to continue to dictate the pace of pension reform.

Yet both Altmann and Webb are concerned the Treasury is not going to simply set pensions policy, but damage the role of pensions in the political hierarchy.

The new pensions minister has been named as Watford MP Richard Harrington. Altmann and Webb had the title minister of state for pensions, while Harrington carries the less lofty title of parliamentary undersecretary of state at the DWP.

Altmann says it is worrying the pensions minister role seems to have been “downgraded”, adding pensions are too important to downgrade.

Webb says the constant fiddling with pension tax relief already served to undermine the overarching goal of boosting long-term saving.

He says: “Ros acted as a counterweight to the Treasury, particularly on Lifetime Isas and the pension Isas idea. I am sure she will have been privately lobbying ministerial colleagues, and frankly, sometimes she did so in a barely coded way in public. That’s been her biggest contribution, being that strong voice to say it’s not just the Treasury world view that prevails.

“The worrying thing about the new set-up is the Treasury becomes even more dominant. Even within the DWP, let alone Government, pensions are at the back of the queue.”

Another vote?

Given May’s rapid accession to become Prime Minister, the prospect of another election has been floated to ensure the Government has public backing to run the country.

But political commentators say this is unlikely.

Jackson says: “A snap election would be the worst possible nightmare for May. She has said the Conservative Government continues to have a mandate from the British public, as they were elected last year on a campaign which manifestly included a referendum on the EU which has since been carried through. Going back to the electorate is difficult, as voters are clearly in the mood for change and the winners are likely to be fringe parties rather than the main ones.”

Anderson says it is quite clear to see Labour is in a “very dark place” and it will be hard for the Opposition to come close to winning an election, now or in 2020.

He says: “The big that usually changes politics is how the economy is doing. There is a concern that the UK enters a recession early next year, and if that is the case that is the last time you want to be holding a general election.”

Lobbying post-Brexit

Clearly, the new Government also has the not-so-small matter of Brexit to contend with. Financial services firms that want to lobby for an EU exit that suits their business will have to get to grips with the new world order.

Anderson cautions against firms going in to fight their corner on the basis they will be able to convince the Government that the Leave vote can be unravelled.

He says: “There is an awful tendency by a lot of people in financial services to rock up in front of those in Parliament and say ‘we know best’. This is more than misguided. If the financial services sector turns up with an argument that says ‘let’s not do this Brexit’ they are going to be met with a very short shrift indeed. The Leave vote cannot be undone.”

Anderson adds: “We are going to see a lot less testosterone in our politics, and we need to see less testosterone in financial services firms as well.”

Adviser views

Tim Page Director Page Russell

“I suspect Brexit will suck the air out of everything and further reforms will be put on the back burner.
“My fear on pensions is we’ll go back to having a succession of different ministers in charge, few of which will really understand the brief. This could hamper long-term planning.”

Lee Robertson Chief Executive Investment Quorum

“With so many big departmental figures gone it is difficult to know what might be in store.
“I wouldn’t be surprised if proposed reforms like the secondary annuity market did not see the light of day. But the Treasury’s drive to reduce pension tax relief may mean the Lifetime Isa is still part of the future savings landscape.”

Who’s who in the Govt top team?

Britain’s new Prime Minister Theresa May speaks outside 10 Downing Street in central London on July 13, 2016 on the day she takes office following the formal resignation of David Cameron. Theresa May took office as Britain’s second female prime minister on July 13 charged with guiding the UK out of the European Union after a deeply devisive referendum campaign ended with Britain voting to leave and David Cameron resigning.

Theresa May takes the top job in UK politics after a six-year stint at the Home Office. She has considerable financial services experience, working at both the Bank of England and the Association of Payment Clearing Services before becoming a Conservative MP in 1997. In opposition one of her roles was to shadow the Department of Work and Pensions.
May has commented in recent years on the UK’s “over-reliance on financial services”.


The new Chancellor is seen in political circles as a “fiscal hawk”, and has made clear one of his priorities is to safeguard financial services throughout the Brexit negotiations.
He has considerable experience in Government, including as Secretary of State to the Foreign Office and Defence and Transport Secretary. He has also previously acted as shadow to the chief secretary to the Treasury.


Damian Green replaces Stephen Crabb at the DWP. Green previously shadowed this department in 1998, but his more recent political appointments have been in the home office, working with Theresa May. He was a financial and TV journalist before becoming a politician.


As Secretary of State for Exiting the European Union, David Davis is charged with overseeing the Brexit negotiations. He has had roles at the Foreign Office in John Major’s government and in opposition was shadow home secretary.
He has been a prominent advocate of Brexit. In 2010 he chaired The Future of Banking Commission, which investigated the causes of the banking crisis in the UK.

Source: Money Marketing By Natalie Holt 20th July 2016 8:46 am

Savers getting raw deal from big banks, says FCA

Millions of savers are getting a raw deal, particularly from the big High Street banks, the Financial Conduct Authority (FCA) has concluded.

In many cases, the interest rate on their accounts has been 0.5% or lower – the same as the Bank of England’s base rate.

Savers should be given clearer information and helped to switch to better accounts, said the FCA.

The banking industry said the low interest rate environment was to blame.

The FCA said that 80% of easy access accounts had not been switched in the past three years.

Furthermore, those who have older savings accounts tend to earn less interest than those who have opened them more recently.

Despite its criticisms, the City regulator stopped short of banning bonus rates. Such rates operate for a limited period, and are used to tempt savers in.

How low can you go? The lowest rates on offer

Lender Account Instant access savings rate
Ulster Bank Easy Access Savings 0.01%
Airdrie Savings Bank Savings Account 0.04%
West Bromwich BS Century Saver 0.05%
Santander Instant Saver 0.10%
Clydesdale Bank Instant Saving 0.10%
Bank of Ireland Classic Saver 0.10%
Smile Easy Access 0.12%
Source: MoneySuperMarket

Source: Brian Milligan, Personal Financial Reporter, BBC News. To read the full article visit

Barclays most complained about firm for investments

Barclays Bank had the most investment complaints referred to the Financial Ombudsman Service between July and December and had the highest proportion of investment complaints upheld against it.

For the six months to the end of December Barclays had a total of 337 investment complaints referred to the FOS. Over the same period the FOS upheld 51 per cent of investment complaints against the bank.
Bank of Scotland, part of Lloyds Banking Group, received the second highest number of FOS investment complaints with 229. Lloyds TSB, also part of Lloyds, had 206 investment complaints referred to the FOS, Santander had 190 investments complaints, HSBC had 180, and Royal Bank of Scotland had 147.

Barclays Stockbrokers, which saw 40 investment complaints referred to the FOS in the second half of last year, had 40 per cent of investment complaints upheld over the same period.

Interactive Investor Trading, which had 62 FOS investment complaints, also had an uphold rate of 40 per cent.

Santander had 38 per cent of investment complaints upheld, as did HSBC. Bank of Scotland had an uphold rate of 35 per cent and RBS 21 per cent.

The average uphold rate was 37 per cent across all investment complaints.

For adviser firms, Sesame had 67 new investment complaints that went to the FOS and St James’s Place had 32. Positive Solutions had 28 FOS investment complaints, Openwork had 24, Personal Touch Financial Services had just one.

The FOS has not provided investment uphold rates for adviser firms as it says the percentages would not be statistically meaningful.
Source: Natalie Holt Money Marketing 5th March 2013

Labour considers radical shake-up of capital gains tax

Labour is considering a radical overhaul of capital gains tax after a new report recommends a 50 per cent rate that tapers down to 10 per cent over 10 years.

The Labour-commissioned report, published today and authored by former Institute of Directors director-general Sir George Cox, suggests major changes to the UK tax regime in order to encourage long-term thinking in British business.
The report follows the Government’s own review into short-termism in the equity markets by economist John Kay, published last year.

Cox’s report states: “Taxation treatment should be changed to attract long-term investors back into the equities market and to incentivise longer-term shareholding. This should encompass both individual shareholders and funds.

“For example, capital gains tax on shares could be tapered, in a series of yearly steps, from a rate of 50 per cent in year one to 10 per cent after year 10.

“Liability for tax on dividends could be reduced, in a series of yearly steps, from the prevailing rate of income tax in year one to 0 per cent after year 10.”

The report also recommends abolishing stamp duty for shares traded in AIM-listed firms to boost the liquidity of the market. The taper for taxation on dividends could be accelerated from 10 years to five years on AIM-listed firms.

It wants to see venture capital trusts and enterprise investment schemes “enhanced”. It suggests the rules banning anyone with a 30 per cent stake in a firm and employees from investing in EIS should be scrapped.

The paper also calls for an end to quarterly reporting and more discussion about long-term strategy in firms’ results, which has been previously backed by leader Ed Miliband. It also calls for up to 30 per cent of executive directors’ pay to be deferred and based on results over five years.

Shadow chancellor Ed Balls says: “Sir George’s report sets out a clear plan for creating that more long-termist economy including radical reforms to executive pay, tougher rules on takeovers and encouraging longer-term shareholding and we will now study his detailed proposals as part of our policy review.”
Source: Samuel Dale Money Marketing 5th March 2013

Pension funds hold more bonds than shares for first time since 1975

Last year funds held an average of 35pc of their assets in shares, compared with 39pc in bonds and other fixed-interest investments. In 2011 they still held more in shares – 42pc against 33pc in bonds, according to the annual survey of company pensions by the National Association of Pension Funds (NAPF).

The last time pension funds held more in bonds than shares was in 1975, the NAPF said.

In 2007 pension funds held almost twice as much money in shares as in bonds, at 55pc against 29pc, with 16pc in other assets. The remaining investments consist of property, private equity and other “alternative” assets.

Shares in British companies are particularly out of favour with pension funds. They held just under 10pc of their total assets in UK-listed companies last year, a fall from 12.2pc in 2011.

As a result of their reduced exposure to equities, pension funds have failed to benefit fully from the stock market’s spectacular new year rally, which saw the FTSE 100 pass the 6300 mark today.

Other figures in the NAPF’s report show the disparity between “gold plated” final salary pensions and newer “defined contribution” schemes.

Final salary pension funds held an average of £88,500 per member – £531bn in assets for 6 million members – while defined contribution schemes were worth just £20,150 per member (£14bn assets and 695,000 members).

Companies are closing final salary pension schemes to new staff at the fastest rate on record, the report found. It said only 13pc of final salary pensions were open to new joiners last year, a fall of a third from 2011.

It was the biggest reduction since comparable figures started in 2005, when almost half of private sector schemes were open to all employees. The annual survey also showed that the defined benefit funds were increasingly closing to workers already in them.

Thirty-one per cent of open private sector schemes were planning changes in respect of existing members and around 60pc were planning changes for new employees. Plans included reductions to scheme benefits and closing the scheme in favour of a defined contribution plan.

Source: Richard Evans,  28.1.2013

OFT launches investigation into workplace pension schemes

The OFT has launched a market study to examine whether defined contribution workplace pension schemes are set up to deliver the best value for money for savers.

Alongside the introduction of auto-enrolment, the OFT says it wants to investigate whether competition will work in the best interests of workplace savers to deliver low cost, high quality pension schemes.

The study will focus on value for money and the size of pension pot savers end up with at retirement.

It will look at how pension providers compete with one another and how the market may develop over time and whether there is sufficient pressure on pension providers to keep charges low, plus the extent to which information about charges is made available to savers.

It will also consider whether smaller firms face difficulties in making pension decisions in the interests of their employees and whether they receive appropriate help and advice in setting up and maintaining workplace pension schemes.

The OFT says it will look into barriers to switching between schemes and a potential lack of ongoing employer engagement in setting up and managing pensions.

Senior director in the OFT’s services, infrastructure and public markets group Mary Starks says: “The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment.

“It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement.”

The OFT says it will work closely with the Department of Work and Pensions, The Pensions Regulator and the FSA during the course of its study.

It will also seek input from key players including the National Association of Pension Funds, the Association of British Insurers, pension providers, trade bodies and those that represent employers and employees.

The OFT plans to complete the study by August 2013.

ABI director general Otto Thoresen says: “People rightly need confidence in a system that delivers value for money pensions and works well for employees and employers. ABI members recognise this and are raising standards to meet customer expectations.

“Pension charges have fallen to their lowest level, and industry initiatives are set to ensure charges and costs are disclosed clearly in a consistent format, and that people nearing retirement get more help to get the best pension deal.

Aegon head of regulatory strategy Steven Cameron says: “We are pleased to see OFT will also examine if smaller firms receive help and advice. Advisers play a key role and we have concerns regulation is making it harder for them to help such employers. Advisers also encourage greater employer engagement which is particularly key as we progress with auto enrolment.”

Source of article: Money Marketing; 17.1.2013

Advisers welcome end to ‘convoluted’ state pension system

Advisers have welcomed the end of the current “convoluted” state pension system and the clarity proposed by Government reforms.

Almary Green managing director Carl Lamb says: “I am delighted the Government will introduce a flat-rate pension for all retirees from 2017 as it provides individuals with much-needed clarity.

“The current system of pension credits is convoluted and makes it very hard for people to work out what they are entitled to once they hang up their working shoes.”

Barretts Financial Services senior partner Kim Barrett says: “You need a Mensa qualification to understand the current system. It is ferociously complicated and even some of the most high brow IFAs do not understand it.”

Affluent Financial Planning managing director Carl Melvin says individuals need clarity to plan for retirement and the reforms will be helpful.

He says: “The lack of clarity creates a woolly notion that people will get a good income in retirement.

“The current system is pretty complicated and it’s important to make it simple.”

Source of article: Samuel Dale, Money Marketing,

Accountants warn child benefit cuts could break EU law

The Government’s decision to cut child benefits breaks European laws by discriminating against Britons, according to the Institute of Chartered Accountants in England and Wales.

In the March Budget, Chancellor George Osborne (pictured) announced the Government is cutting child benefit payments for families where there is one person earning over £50,000.

Families with a wage earner with a salary of £50,000 or more will lose 1 per cent of the benefit for every £100 they earn over the new threshold.

Families with a person earning over £60,000 will not receive any of the benefit.

According to the Telegraph, some European Union citizens working in Britain will not have their payments reduced, leading the institute to brand the move “discriminatory”.

It says under the new rules, the money will still be paid to families but will be clawed back through a tax charge on parents’ earnings.

ICAEW tax facility chairman David Heaton told the Telegraph the decision to recoup child benefits through the tax system will expose the coalition to legal challenge.

He says: “You could find yourself in a British office, sitting next to a colleague from elsewhere in Europe who is paid the same as you, has the same number of children as you and is receiving benefits for them, but who is not facing the same tax charge from HMRC as you. That is discriminatory.”

Heaton says it would be “virtually impossible” for ministers to extend the tax charge to migrant workers as HMRC lacks access to the information about foreign workers’ salaries it would need to calculate the charge.

The Government told the Telegraph yesterday that Whitehall lawyers are confident the child benefit changes are permitted under EU law and that any legal challenge would fail.

A spokesman says: “We are clear that this legislation is fully compliant with EU law. Anyone who receives or whose partner receives child benefit in the UK and is resident for tax purposes will be liable for the charge whether they are a UK citizen or a migrant worker.”

Source:Paul Toeman