It is not exactly the hottest of topics but financial services – and specifically pensions – has at least made an appearance on the general election agenda.The Tories have a plan for the next Parliament but Labour and the Liberal Democrats have rather dispiritingly made it clear that they intend to leave the subject hidden away in the long grass, where the Government booted it a few months ago, until the Parliament after that. In principle, however, every serious party – I am not sure about Robert Kilroy-Silk or George Galloway – agrees that sooner or later something is going to have to be done to tackle those difficult, long-term, demographically-driven issues – principally those leading us towards a society made up of old, retired people living for decades and consuming ever greater quantities of our health and welfare resources. Nevertheless, it seems clear that, at least within the lifetime of the next Parliament, no one will be willing to suggest that the only way to ensure people put more money away for the future is to make it compulsory for them to do so, either on an individual basis or by membership of a collective scheme managed by employers or the state. Any scheme bringing any form of compulsion to long-term savings is seen to be political suicide. Presumably, this means that politicians would like to see some signs of encouragement from a non-compulsory approach. In this regard, I have what may be a useful suggestion to make. It might help a little if those of us whose job it is to commu- nicate ideas about subjects such as long-term financial plann- ing were able to do so without our arms and legs being firmly tied behind our backs. Over recent years, the impact of Government policy on our ability to communicate in financial services has been negative far beyond all imagining. The industry is very often criticised for the complexity and opacity of its communications. Today, this is about 5 per cent our fault and 95 per cent the fault of Government bodies including the Treasury, the Inland Revenue, the FSA and the other regulatory bodies whose policies we must implement and rules we must obey. There is, incidentally, a completely different point to be made about the extraordinary tediousness of our commun- ications but that is overwhelmingly our own fault. Sometimes, the interventions which baffle and irritate consumers are forced directly upon us. Radio advertising is a case in point. Regulators take a bizarre pleasure in making us shout meaningless mumbo-jumbo at the public, sometimes for as much as half the length of a 30-second ad. Often, however, the communication outrages which we inflict on the public are forced indirectly on us by the nonsensical over-complication of Government financial and fiscal policy. A good example is the tax-free Pep/Isa thing. The original Pep legislation introduced in 1987 was delightfully complex, with different investment limits for different kinds of investment, lots of limitations on what qualified for investment in a Pep and some pointless complications like the gratuitous exclusion of investment trusts. As I recall, these complications were unexpectedly ironed out over the following years so that, by the early to mid 1990s, most people understood that they could invest 6,000 tax-free in a Pep each year. Here, by contrast, is a brief excerpt from a brochure in which a fund group tries to tell us what we can invest in an Isa in 2005/06: “Investors who hold Isa insurance components with other Isa managers should exercise care regarding the treatment of these existing Isa insurance components as they will be reclassified under the new rules. “Any insurance Isa component opened before April 6, 2004 will automatically be treated as a stocks and shares Isa component after April 6, 2005. Any insurance Isa component opened on or after April 6, 2004 will have a 5 per cent ‘cash-like’ test applied by the associated Isa manager to determine if the Isa will be treated as a stocks and shares Isa component or as a cash Isa component after April 6, 2005. “In most cases, insurance Isa policies will be stocks and shares Isas but in some instances may be cash Isas. If you hold insurance Isa components with other Isa managers, they should have contacted you regarding their reclassification as this could impact on any existing Isas you intend to contribute to. If you are in any doubt about your insurance Isa after April 6, you should contact the Isa manager who sold you the policy.” As explanations go, this is far from the worst but what words exist to describe the people who make us write this stuff? Drill down another level into the Isa regulations and things get much worse. Does any normal person intuitively understand the idea of a tax credit? I have to write about these things for a living and I cannot get my head round it. Tax is something you pay. A credit is something you get. Tax credit is an oxymoron, like dry water or cold heat. How can it be a tax and also a credit? You might hope, or at least pray, that any normal person seeing all this would try to avoid making things worse. Wrong. Things are about to get much worse in the field of pensions as a result of a terrifying new initiative called pension simplification. In the great scheme of things, the word “simplification” might be appropriate. However, for the poor copywriters trying to explain it, things may seem rather different. You try explaining the difference between primary protection and enhanced protection on the personal lifetime allowance and whether policyholders should register for one or the other or both. Even the child trust fund regulations run to over 40 pages of unbelievable and completely unnecessary complexity about how much you can invest in what and at what charge. My advice is to avoid getting too excited about the idea that financial services are going to be an election issue. Between a public who do not care and cannot understand and politicians who do not want to do anything brave and cannot communicate, I think we will manage to maintain a pretty low profile.
Montpelier Group is continuing to expand in the Far East by joining forces with Malaysia-based IFA Expatriate Financial Services.
Tuesday. Only minutes earlier, a confident captain had told passengers the flight would land ahead of schedule. Yet we were still circling Guernsey. It was still daylight and I enjoyed a porthole view of Brecqou, island home of the Barclay brothers, owners of the Telegraph, where I am a regular freelance. Maybe I should have […]
Nine out of 10 expatriates do not have offshore savings accounts, a survey by offshore savings bank Alliance & Leicester International has found.
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