“Choice” has been the maxim for the first few weeks of 2002. While there has been a whirlwind of policy issues since the start of the year and it is difficult to know which way to face, my agenda has been dominated by two major events.
What are they? Well, it will not take readers too long to guess. Annuities and polarisation are at the top of my in-tray at the moment – and look set to remain there for several months to come. Both appear to be about “choice”.
First, polarisation. While there has been a great outcry in the past week about the implications of the FSA's pronouncements on the future of advice, I am not really surprised by the outcome.
In November 2001, FSA chairman Howard Davies gave the marketplace a fairly strong clue as to the likely direction of the super-regulator's thinking.
But the Treasury's attitude towards polarisation has been clear since the 1997 election. Labour has been unhappy with polarisation since it came to power and has been looking for this opportunity to sweep it away. The onset of N2 was the only moment to wait for in that regard.
I am not just fawning to the readers of this publication but the Government does believe – wrongly – that the overwhelming majority of the ills of pension and endowment misselling can be laid at the door of IFAs.
While this is unfair, it is highly likely that the FSA's changes will go through after the consultation period ends in mid-April. The question now is how will IFAs adapt to these changing market circumstances?
I think the reality of the IFA community is that it is highly entrepreneurial and is destined to survive moves to depolarise. Commission disclosure and bancassurance have not made for gloom and doom – in fact, the very opposite.
One thing which is very surprising about the reaction to the regulator's announcement has been the whole-hearted support of the Consumers' Association for the continuance of independent advice. And more than that – the availability of independent advice for as many people as possible.
But this was the tragedy of polarisation – and one the Government sensed. Those who most needed access to “independent advice” were unable to access it as the IFA community focused increasingly on high-net worth clients.
The demise of polarisation is in much part due to the inability both of IFAs and product providers to engage fully in the Government's social exclusion agenda.
This is where depolarisation gives intermediaries a major opportunity – the chance to engage with consumer groups in a campaigning coalition to ensure independent advice has a future. For so long, groups such as the CA have been “bogeymen” to IFAs but now there is the opportunity to work together.
Working together should become a longer-term objective of consumer groups and the independent sector, for example on stakeholder pensions, mortgages and Isas.
Stakeholder pensions provided the strongest clue to the Treasury's and FSA's likely views on the future of advice – allowing limited multi-ties last year when the scheme was launched.
The Government is now looking for stakeholder to be a success. This is a political imperative and, up until now, stakeholder has not really caught fire.
There is a great opportunity for the independent community to take advantage of the Government's predicament and the key is distribution. Employers are central towards making stakeholder work – and IFAs are best placed as the major introducer of employee benefits.
It seems clear that now would be a very opportune time for the independent sector to make much of this positioning, think more creatively and perhaps bring a sea-change in Treasury thinking about “independence”.
Which neatly brings me to the second major issue in my in-tray – annuities.
Our work with Dr Oonagh McDonald and the retirement income reform working party has been intensive into 2002 and culminated in a successful second reading of MP David Curry's private member's bill – the Pensions Annuities (Amendment) Bill.
It is highly unusual for private members' legislation to progress beyond a second reading and David Curry (Conservative MP for Skipton and Ripon) is delighted to have been able to take the bill further.
This means the bill now proceeds to the committee stage where detailed scru-tiny of the proposed legislation can take place. The signs are encouraging that a large number of MPs – on all sides of the House – are taking a significant interest in the bill's development.
In fact, the committee stage is beginning much earlier than expected and we shall see more debate on the issue in advance of the Budget in March – a development which all those seeking reform should relish.
While I must concede that it is likely the Govern-ment will try to kill the bill in committee, the fact is the legislation is going to be given a good airing and the arguments in favour of reform of the current system will be properly addressed.
Of course, the bill also comes at a time when the Treasury has announced a long-awaited consultation around annuities.
The important thing for all those seeking reform now is to remember one thing – this Government responds to a welter of public interest.
What reformers need to show is that giving choice in the retirement income market is not just a move that will benefit the rich.
There are hundreds of thousands of pension savers on middle incomes crying out for this change.
Remember “joined-up thinking” – the New Labour phraseology of the first term? Perhaps we can ensure Parliament, Treasury, Department of Work and Pensions and the Inland Revenue can start some genuinely creative thinking on the issue – it would be nice wouldn't it?
Iain Anderson is director and chief corporate counsel, Cicero Consulting