View more on these topics

Reckless driving

The Government has developed such a nasty habit for U-turns that it is amazing anyone in financial services ever gets anywhere. Added to property in Sipps comes Hips and arguably Asps. There have been many other changes of stance but these are the big ones that have seen intermediaries and everyone else in financial services have to shift position time and again.

In the case of home information packs and self-invested personal pensions, it wasn’t so much the change itself which was wrong but the manner of the change. Many might argue that the principle of Hips was good although the practical effect would have been to cost people extra money when trying to move house.

As for Sipps, the move to stop people putting residential property in pensions was welcomed by many if not all advisers. Most felt that the benefits were outweighed by the possible risks of misselling as the sector attracted unregulated property entrepreneurs plus the perils of topsy-turvy asset allocation. But some mourned the loss of a chance to make pensions sexy, possibly for the first time in their existence.

In the case of alternatively secured pensions, it may be a little harsh to call warnings about their abuse a U-turn but there was definitely a change in the emphasis of the language used by the Government as it feared losing tax revenues.

One can also throw inheritance tax into the mix, where the original changes to trusts introduced in this year’s Budget had huge implications for the public and were then watered down.

In all these changes, the big losers are the businesses directly affected – tax advisers, firms with Hip divisions or the property companies and mortgage banks which allied with pension firms. The U-turns are hard to quantify but Government flip-flopping has cost business very many millions of pounds. One estimate on Hips was a quarter of a billion pounds.

Viewed in such stark terms, it shows how reckless this Government attitude to policy changes has been. If you consider that many of the financial services people affected are the sort of entrepreneurs and risk takers who spot chances and make things happen, then it is even more irresponsible as the Government is hurting the sort of people who make the economy work – the ones the Chancellor claims to have nurtured during the life of this Government.

Intermediaries have also been hurt. Companies had started to gear up for Hips and were beginning to warn clients. The pension and IHT changes left advisers looking powerless in the face of Government fickleness.

Once again, consumer confidence has been hit although probably more in retirement and savings than in the housing market, which at times can seem more than an unstoppable engine.

What should be done? Well, no one can rule out U-turns. Governments make policy mistakes and then correct them. Whether that happens in the early stages of the development of a policy or just as it is about to be implemented does not necessarily change the argument for or against something. If it is wrong, it is wrong. But the Government and the Treasury, in particular, should undertake to try and avoid U-turns.

If something is in draft legislation, then it is hardly surprising – when a Government has a majority – for an industry to begin planning and investing.

It would also make a refreshing change if ministers could admit: “We changed our mind.” The change in psychology required might not be possible for politicians but at least some of their officials might consider it.

Finally and perhaps most important, the Treasury should try and lose its traditional suspicions of financial services. For a department that so champions private sector involvement in all manner of public sector areas, it often works against the grain when it tries to work with financial services companies. This applies to all firms from huge providers through to advisers.

If ministers and officials change their attitude, then they might also open their ears a little earlier and not assume a vested interest lies behind everything the industry says. As another wholesale reform of pension savings is being plotted, it would be helpful if all concerned could know that U-turns will be avoided if at all possible. In that way, maybe everyone – ministers included – could finally get where they want to go.


Simple truth is that client is worse off

I am involved in dealing with a client who has two individual pension arrangements, one with Legal & General and one with Friends Provident, in respect of the same employment. One fund value is about 240,000 and the other is 150,000. The bigger fund value has the benefit of very attractive guaranteed annuity rates. If […]

Promising position

Although there has been a marked increase in market volatility, the big picture of late is that there is not any discernible trend and markets are trading off each rumour and data release.

Quarter of firms worried about final-salary deficits

Research by the firm shows that 26 per cent have concerns about their final-salary schemes while only 11 per cent feel more confident about their schemes than they did 12 months ago and 63 per cent say there has been no change in their attitude. Pru says the manufacturing and financial services sectors are showing […]

Rightmove set for legal action over Hip

Rightmove says it is considering launching a multi-million pound legal action against the Government after its U-turn on home information packs. The news comes as the Government last week apologised to home inspectors after it said in July that home condition reports would be made voluntary from June 2007. Rightmove pulled its Hip, which cost […]


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