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A CONSUMER&#39S VIEW

The chaos surrounding the future of polarisation gets worse by the day. We recently heard from Council of Mortgage Lenders chairman Roger Burdon who, quite rightly, wants a commitment from the Treasury on the regulation of mortgage brokers.

It is nonsense that you need a licence to watch television or drive a car but absolutely anyone can sell mort- gages, including convicted criminals and bankrupts.

Taking out a mortgage is almost certainly the biggest financial transaction that most individuals are likely to make and homebuyers need good independent financial advice from a properly qualified and regulated intermediary if they are to negotiate the minefield of discounted, fixed, capped and flexible home loans.

Speaking at the recent Council of Mortgage Lenders annual lunch, Burdon said: “While it is not practicable for intermediaries to be regulated in the same time frame as lenders, we call upon Treasury economic secretary Melanie Johnson to announce an intention to authorise them.”

Very sensible too, except the Treasury is busy dismantling polarisation, one of the major benefits of regulation.

What is the point of regulating mortgage brokers if there is no longer any apparent difference between intermediaries, who are truly independent mortgage brokers and can recommend any home loan from the entire range on offer, and tied agents?

If multi-ties are to be allowed elsewhere, will the regulators allow multi-ties for mortgage brokers? There seems no logic in banning multi-ties for mortgage brokers if other investment intermediaries are to be allowed them.

This ridiculous situation highlights what we all know – that abandoning polarisation is one of the worst moves this Government has made. Just as the public was beginning to understand the benefits of truly independent financial advice, the Government has decided to put back the clock 20 years.

We all know why the decision was made. It was the price the high-street banks extracted from the Government for promoting stakeholder pensions.

The Government should think again very carefully. If the high-street banks are to promote stakeholder, it could result in the worst misselling crisis ever. Even assuming bank counter staff have the qualifications to make a sensible judgement on what is an appropriate pension scheme for an individual customer, there are huge problems.

Stakeholder should not be sold to anyone on average earnings or less because, as things stand at present, the amount the individual could accumulate in a stakeholder pension would do nothing other than disqualify them from means-tested social security benefits for which they pay nothing.

Moreover, if interest rates remain low, it is debatable whether it is worth anyone saving in a money-purchase pension scheme unless the requirement to buy an annuity and the tough constraints on income drawdown are removed.

No one should save in a pension scheme – unless their employer is making significant contributions – until they have used up their full Isa allowance for the year. Few people save more than £7,000 a year towards their pension, so most individuals in non-pensionable employment or in a stakeholder scheme where the employer contributes nothing should not bother with pension saving at all but put the money in an Isa.

The Government is working on these points with the promise of pensioners&#39 tax credits which might – but only might – make it worthwhile saving for retirement.

Whether individuals will choose to do this within a stakeholder pension rather than an Isa seems unlikely. But there is still a crying need for independent advice and it is about time the Treasury admitted it is a huge mistake to do away with polarisation.

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