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Culture shock

What a bizarre last few weeks we have had. After spending months explaining to clients that it may not be in their best interests to put their homes, racehorses, bling or exotica into a Sipp, in one fell swoop, Gordon Brown takes the option away by introducing a one-off tax charge equivalent to 40 per cent if these types of assets were placed in a pension.

The Chancellor has not given us a lot of time – less than four months to be precise – to change all the communications and advice already provided before A-Day – or Armistice Day as 46 per cent of a recent IFA Promotion poll thought this acronym stood for.

What does this U-turn do to increase the public’s failing trust in financial services? It will be seen that pension companies have taken away the one and only relatively exciting thing to happen to pensions for years.

Certain sections of society are wringing their hands with glee that they are not particularly affected by the Turner report which, as you will recall, proposed gradual increases in pension ages to 66 by 2030, 67 by 2040 and 68 by 2050.

This double-edged sword is a challenge to the long-standing culture of retire-ment for the male masses at 65. These days, many people want to work longer, particularly on the back of mortality statistics which indicate that we will live on average to a ripe old age. Others cannot wait to spend more time in the garden, travelling or on the golf course. Tradition has it that retirement should be at 65. If Turner gets his way, this will herald a big change in British culture.

It is not only in the pension arena that change is afoot. If you read all the recently issued FSA missives, many of the rules that control our industry are about to change. One of my bugbears is the binning of the key facts documents to be replaced by quick facts as it has only recently been made public by the FSA that clients do not read these documents.

Even with the quick facts, the poor customer will still be bombarded with compliance-dictated information at an initial meeting. The totality of the information that a client receives should be looked at, not individual documents.

At least we have time to catch our breathe due to the delay in the introduc-tion of the European Comm-ission’s Market in Financial Instruments Directive (Mifid) which is a huge piece of European legislation. The directive establishes the framework under which financial services firms are able to carry out investment business across Europe via a single regulatory “passport”.

The FSA will need to incorporate Mifid into its rules which means a major rewrite of the conduct of business rules. From a day-to-day perspective, the way we “know our clients”, provide advice, hold client money and how we categorise clients will change.

Staying compliant with training and competency will be different, as will the look of financial promotions, with a whole new financial promotions regime expected to be introduced in 2007, at a similar time as MiFiD.

In the middle of all the pension noise, we saw the introduction of a new class of legal human relationship – the registered partnership. The headlines may have focused on Elton John’s wedding but The Civil Partnership Act has significant implications. Its impact on same sex couples who choose to register their partnership results in many things such as the law relating to wills, intestacies, admin of deceased person’s estates and life insurance. A civil partnership will entitle same sex couples to bring claims under the Inheritance (Provision for Family and Dependants) Act 1975.

The act now applies equally to same sex and opposite sex couples. The changes to the intestacy provisions now means that if a partner dies intestate, the same sex partner, provided that there is a formal civil partnership, will be treated in the same way as a surviving spouse. This is a welcome and long overdue change to British culture.

As we face far-reaching change to British culture and the UK’s retirement provision, I hope everyone reading Money Marketing will remember who matters most – the customer.

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