19DP’S FINANCIAL ADVICE & SERVICES |
BEST PRACTICE REPRESENTATIVE 2018
a successful roll-out with “opt out”
rates far smaller than feared. It has
created a culture of saving towards
retirement, with a large number of
employees choosing to contribute over
and above the minimum compulsory
contribution levels. The launch of
“NEST” (the workplace pension set
up by government) helped many small
employers as, for many life offices, the
contributions would have been below
their minimum levels. However, we
feel that the role of NEST needs to be
clarified to ensure that it does not seek
to become a financial adviser.
The legislative requirement for consumers
to have to seek advice in connection with
“small pots” of £30,000 or above is a
sensible safeguard. Similarly, those within
defined benefit schemes (which often
contain valuable guarantees) need to
proceed carefully to avoid costly errors.
This ensures that individuals receive
advice on the best way for them to
access their pensions in an efficient
manner. This does mean that there is a
cost to the consumer, but one that we
believe is worthwhile – as the outcomes
often lead to them being financially
far better off. For those with smaller
amounts, this requirement is often
perceived as a cost to them that they
should not have to pay. However, on the
whole, by the end of the process they
do see value in seeking independent
and impartial advice and regard it
as an investment in their future. The
government did set up a system to
allow consumers to use an amount of
their pension fund to pay for/towards
obtaining advice. This is not widely
publicised, so not many are aware. With
that said, a lot of providers’ contracts will
not facilitate this fee option. This perhaps
needs to be revisited with something like
a voucher system that’s centrally funded.
The potential implications for those
seeking to access pensions while
remaining in work can be volatile,
and are a real reason to seek financial
advice. This is best displayed in the
circumstance of tax-free cash via
flexible access drawdown: it brings
with it the unintended consequence of
the “special allowance” investable into
a pension becoming restricted to only
£4,000 per annum.
For those looking to withdraw a large
amount, there is also the “month one”
taxation of benefit, which could lead to
a large amount of what they thought
they would get going to HMRC instead
– although it is possible to claw this
back in the future.
European legislation, MiFID II, has as
its ideal transparency, and it’s good
in principle but becoming a challenge
to administer. The intention of this
legislation is sound; however, providers
lack information or systems in place to
help us comply, causing strains on time
and resources. We believe this is causing
information overload for clients and no
actual benefit for consumers at present.
Investment offices are now more
transparent, and it will lead to a review
of charges on funds, which could be a
good thing for clients in the future.
GDPR is a much-needed revamp of
protection of data, and recent high-level
public cases in regards to cybersecurity
have put in the spotlight the need
for this. However, this again means
we need new software or hardware
to fulfil these obligations, which is
another tension on time and resources.
Either MiFID II or GDPR would be
enough at one time – they stand alone;
but two projects for a small company
to comply with in a relatively short
period is very challenging, certainly
time consuming and costly.
One thing that is certain: the public
need face-to-face, personal service and
advice more than ever. There is plenty
of information (and misinformation)
online, but nothing is better than
dealing face to face with an adviser
who takes the time to understand
the client’s needs and aspirations
and offers impartial, unbiased and
professional advice with integrity.
One thing that
is certain: the
public need
face-to-face,
personal
service and
advice more
than ever
“
“
Rt Hon The Lord David Blunkett
Rt Hon The Lord Eric Pickles
