Cheers everyone! It’s not often when you are a pension specialist and a Scottish rugby fan that you get two wins in one week so I’m making the most of it (I know that those in the Southern reaches of our United Kingdom may be a bit more used to such things but be nice).
So the economic figures are not great, but exactly what I wanted for Christmas on pensions – no further nibbling of the tax relief jaffa cake (other than a little more chocolate on the LTA layer) and a recognition that our schoolchildren will have to be a lot better at maths if they are going to be able to calculate the Annual Allowance Taper Relief. In fact the P-word only got two mentions, and one of those was in connection with housing benefit. The other, if you were wondering, was “facilitating” pension fund investment in UK scale-up businesses – very worthy but no changes to the bible that is the Pension Tax Manual.
There is a downside of course. No new legislation means the Regulator will have a lot more time to concentrate on implementing new rules and playing catch up with the existing ones. We can expect a Policy Statement on DB transfers in the next few months and there are some very nasty acronyms approaching from Europe – MiFID, PRIIPS and GDPR. I’m not going to tell you what they stand for, it’s more fun trying to guess, but they are going to affect adviser businesses and therefore the quality of services offered to consumers.
MiFID in particular will hit us in January and contains some significant changes to disclosure. Not just advice charges, which are within our control, but all costs related to both the products and advice services offered to a client. Two things are abundantly clear:
- This is long overdue – consumers have a right to know how much they are paying and to decide whether they are willing to do so. The way to build consumer trust is to be up front about the cost of our services and able to demonstrate the value of the overall result.
- There is absolutely no commonality in the charges across different areas of products and services and while we hope most organisations will be able to meet the rules in time it does not mean that the overall goal will be achieved without the chancellor’s hoped for improvement in mathematical capability. What it might do is force the industry as whole to bite the bullet and create a clear and consistent format from start to finish – but I suspect that would be about as likely as Scotland beating Australia by nearly 20 points.*
MiFID does dangle the possibility of some more immediate benefits. The definition of independence is slightly different from that of RDR, including the ability to offer independent advice in relation to pensions on a stand-alone basis. It’s not quite the recognition I’d like to see that specialism is in most professions a very positive thing, but at least it means we’re not lumped together with the very different business model of those who are restricted by product provider.
The other very welcome issue is the emphasis on regular reviews and ongoing advice. For those of us in pensions this should already be standard practice – particularly where benefits have been or are about to be taken. Once income becomes available a client’s portfolio becomes even more sensitive to change and should be looked after properly. Carrying out annual reviews and providing updated suitability reports as and when changes occur should be the very least of it.
* But miracles do happen!! 
