Industry blog
January 2008
What price Personal Accounts?
31 January 2008The Personal Accounts Delivery Authority (PADA) launched a consultation this week into the most appropriate charging structure for Personal Accounts. Quite rightly, it’s deferred discussions about the level of charges - that can't be considered until PADA finalises scheme design and negotiate with those who might provide contribution collection, policy administration and investment services.
There's no question that PADA has to come up with a charging structure that’s good value and fair across customer groups. But it's good to see PADA also accepting the importance of a structure which will make sure the scheme is self financing - viable in the short term and sustainable in the long term.
I'm particularly pleased to see clear acknowledgement that restricting charges to a single fund based charge is not necessarily the right place to start. Not only isn't it always the fairest to customers, it create major financing problems as the industry knows only too well from stakeholder pensions. Lets hope this creates market and regulator acceptance of modest upfront or contribution charges (alongside more a modest fund based charge) across all forms of pension – which is especially important where advice is being provided.
PADA is also looking for views on how best to manage business risks such as large numbers of members stopping contributions and / or a big fall in investment values. Life offices like us have enormous expertise in managing these risks against an uncertain future. We now need to play our part in ensuring Personal Accounts are set up on a fair and sound footing.
Steven Cameron
Head of Regulation
Battle lines are drawn
17 January 2008
As the Pensions Bill entered its Committee Stage in the Commons this week, the battle lines on which the Government and Opposition will square up came more sharply into focus.
The Conservatives are concentrating their fire on the interaction between personal accounts and means testing, raising questions of whether it’s appropriate to auto-enrol people who may not benefit from saving. The Government's response has been to note that this is the case with existing pension schemes and to claim that the risk from not saving outweighs the difficulties.
It’s encouraging that the various external witnesses, such as ABI, the NAPF and PADA itself, asked to give evidence, have also been grilled on how to solve the problem of GPPs not being able to auto-enrol, and on possible solutions to the threat of levelling down. It’s vital to find workable answers to these issues. If not, the Government will fail in its stated aim that personal accounts should complement existing pensions, not undermine them. If the DWP can’t work with the EU to allow auto-enrolment into GPPs, then it’s vital streamlined joining is accepted as an alternative so millions of people can continue to save for their retirement in good GPP schemes.
Attention will switch next week to line-by-line scrutiny of the Bill and there are already a raft of Opposition amendments down which will hopefully smoke out some of the Government's thinking on these and other issues.
Clearly, there are many questions still to be answered, but at least they are receiving a good airing.
Mark Stockwell
Corporate Affairs Officer
Do wraps and platforms threaten ‘Independence’?
11 January 2008
Before Christmas a number of senior FSA officials delivered speeches where they made clear that the term ‘independent’ would (almost) certainly mean ‘whole of market’. This was fantastic news as our consumer research showed that that the public’s definitions of ‘independent’ include having access to the whole of the market.
The question now is how far will the term ‘access’ be taken advantage of? Consumers expect IFAs to recommend the right product and fund from the entire market. They have deliberately chosen independent advice to achieve this aim. Yet many advisers appear to have been caught up in the platform and wrap ‘hype’ and have missed the crucial distinction between those platforms and wraps that offer open architecture and those that don’t. Put simply what is the difference between a direct salesman working for XYZ Life whose product range and investment options are restricted to XYZ and an ‘IFA’ who is tied to the products offered by their platform and the range of funds they offer? In my view there’s none.
With many tied Life Offices now offering a wide investment choice it is difficult to see what difference there is between them and IFAs who are tied to a platform that restricts the choice of products (often to those offered by the wrap/platform providers parent). The same applies to the investment choice.
In their consultation the FSA have partially got around this problem by suggesting that independent advisers would have to compare their platform/wrap against the entire market before making a recommendation. But is this really practical? Surely, the simple answer is to require all IFAs to only use wraps and platforms that are on an open architecture basis where any product or investment from any provider could be placed. Only then will platforms and wraps be seen for what they are – useful administration tools, but not the panacea for financial planning ills.
Peter Williams
Head of Industry Development
Clear your hangovers: the RDR marches on
8 January 2008The Personal Accounts Delivery Authority (PADA) launched a consultation this week into the most appropriate charging structure for Personal Accounts. Quite rightly, it’s deferred discussions about the level of charges - that can't be considered until PADA finalises scheme design and negotiate with those who might provide contribution collection, policy administration and investment services.
There's no question that PADA has to come up with a charging structure that’s good value and fair across customer groups. But it's good to see PADA also accepting the importance of a structure which will make sure the scheme is self financing - viable in the short term and sustainable in the long term.
I'm particularly pleased to see clear acknowledgement that restricting charges to a single fund based charge is not necessarily the right place to start. Not only isn't it always the fairest to customers, it create major financing problems as the industry knows only too well from stakeholder pensions. Lets hope this creates market and regulator acceptance of modest upfront or contribution charges (alongside more a modest fund based charge) across all forms of pension – which is especially important where advice is being provided.
PADA is also looking for views on how best to manage business risks such as large numbers of members stopping contributions and / or a big fall in investment values. Life offices like us have enormous expertise in managing these risks against an uncertain future. We now need to play our part in ensuring Personal Accounts are set up on a fair and sound footing.
Steven Cameron
Head of Regulation
Important note
This blog provides the views of our industry lobbying team. The views are the opinion of the person writing the entry of the blog and don't necessarily represent the views of AEGON in the UK. They are based on their interpretation of industry developments and their current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.
