View more on these topics

ABI works out how to close gap with free advice

The ABI has been getting accolades this week for its proposal to reward small to medium-sized employers with tax breaks for providing access to financial advice for their staff.

The idea is that firms should get a financial break if employees get access to face-to-face advice from an IFA every two years.

The ABI says it would motivate more people to save for their retirement.

It believes that a £500m a year investment by the Government could reduce the savings gap by as much as £2bn a year.

IFAs point to the large numbers of lower-earners who have in the past relied almost exclusively on industrial-branch-style salesmen visiting them in their homes to satisfy their financial needs.

Now that the people from the Pru, Eagle Star and Britannic are no longer coming around because it is uneconomical, this group has been largely excluded from receiving financial advice.

Heartland Independent Advisers chief executive Tony Weaver says: “There is a huge percentage of the population receiving no financial advice at the moment. The workplace is an ideal site to provide cheap advice to large groups of people who may not be receiving it otherwise.”

The workplace advice tax credit comes as part of a three-step action plan put forward by the ABI to boost savings for retirement.

The two other steps are for a pension contribution tax credit, outlined two weeks ago, to encourage employers to contribute to pension schemes and reducing the vast majority of the regulatory costs associated with delivering advice.

The pension tax credit would see SME employers which contribute to employee pension schemes given a tax break to encourage them to continue doing so. The ABI believes this measure, which would cost the Exchequer £900m a year, would knock £2.8bn off the annual savings gap.

It has asked consultancy Oliver Wyman & Company to look at the costs of providing advice. It estimates that up to 80 per cent of these costs can be stripped away by tearing up parts of the rulebook.

For so-called safe-harbour products, the ABI believes advisers are too bogged down with compliance and procedure. Oliver Wyman says each product sale can take up to 12 hours – a situation it says cannot continue.

By abolishing the requirement for a suitability letter, allowing introducers to carry out more of the information-gathering tasks involved in selling products and scrapping the need for a second set of key features after the sale, Oliver Wyman says savings could be boosted by as much as £4bn to £5bn a year.

The ABI suggests that by combining the three proposals around £10bn could be slashed from the savings gap.

This would, of course, come at a cost and this is where the proposals may encounter some resistance from the powers that be. The pension tax credit and the workplace advice tax credit would jointly cost £1.4bn a year.

ABI head of pensions Joanne Segars says: “It is clear there is a widespread recognition of the need for workplace advice. The key, though, is making it happen. Our view is that many SME-type businesses will not make it happen without prompting.

“Saving for retirement is a partnership between individuals, employers, the financial services community and the Government. We think all parties have a responsibility to contribute and obviously there are costs involved.”

Treasury Financial Secretary Ruth Kelly is on record speaking on the merits of workplace advice, most recently when detailing the Government&#39s plans for annuity reform.

Aifa director general Paul Smee says: “I suspect that £500m may be too much. What I think we are now doing is not arguing over the principle anymore, we are arguing over the price tag.”

Syndaxi Financial Planning principal Robert Reid says: “If you want stakeholder to work, you are going to have to do something for the employer. But you have to make sure what you are doing will not make people say, &#39So what?&#39 and ignore it. If it is at all complicated, employers will not take it up.”

However, Sofa chairman John Porteous says: “Constructive ideas like this are always welcome but I think the savings gap is a lot more complicated than just incentivising advisers to get into the workplace. The undeniable truth is that many people simply cannot afford to save.”


Pickering may call for three types of pension

Alan Pickering&#39s long-awaited recommendations for simplifying pensions, due out this week, are likely to call for the setting up of three types of pensions.But the full ramifications of his proposals will not bec-ome clear until the Inland Revenue tax simplification review is published in September.Pickering has said his and the Revenue&#39s work are “two parts […]

IMA calls for Euro fund standards

The Investment Management Association has urged European regulators and fund management companies to introduce a common accounting standard for investment funds.Deputy chief executive Sheila Nicoll says investors would benefit if European firms adopted a standard approach to fund reporting and information.She says: “Would it not be a major step forward for our investors if we […]

Consumer Panel says Sandler proposals put more pressure on consumer

PRESS RELEASE Date: 9 July 2002Ref: 06/2002Consumer Panel says Sandler proposals put more pressure on consumerThe Financial Services Consumer Panel warns that Ron Sandler&#39s wish to simplify the sale of savings products, published in his report for the Government today, is in danger of being achieved at the expense of consumer protection. The report proposes […]

Steve&#39s Christmas stocking

Everyone appreciates examples of individuals who are dedicated to their chosen career path but even we could not believe our ears when we heard the following tale.Scottish Life Mortgages director Steve Scholes (above) is so slavishly committed to his calling that we felt a public pat on the back was necessary.As the story goes, Scholes […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm