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Shredded surplus

Until recently, I had always thought the Investment Management Association was a more up to date trade body and one that the ABI should considering copying.

Then we heard that means-testing is no barrier to savings on the basis that no one has any credit card debts either. Not only is IMA in denial, it is in danger of becoming a laughing stock.

Fact – if someone saves for 20 years and then is no better off than someone who does not save, they will not be best pleased.

I think what the IMA was trying to say was that people need to make sensible levels of contributions but, given the current low level of contributions to even company-sponsored defined-contribution schemes, this is some way off.

Recently, we had the unedifying spectacle of Ed Balls stating that it was effectively the civil servants’ fault for the removal of dividend tax credits.

As if that was not enough, we are reminded that Alistair Darling had stated at the time that pension funds were in surplus to the tune of 50bn.

It is just a pity that Nigel Lawson had already attacked the same surpluses some years earlier. The figures had allegedly come from Arthur Andersen, perhaps they had fallen off the shredding pile?

The reality, as with the IMA and means-testing, is quite different. Few schemes were still in surplus and unless you were on another planet, all pension consultancies were well aware of this.

Gordon needed to raise funds and, as he did recently he always uses sources that are not easily understood.

This gives him the oppor-tunity to create the illusion of helping others when he is really just helping himself.

The thought of him leading the country fills me with dread and we can only hope that this latest exposure of fast practice is just as unpalatable to Labour’s MPs as it is to the rest of us.

Finally, a word on the news that The Money Portal has secured the backing of 11 product providers to “bridge” the income of advisers to enable the move to fundbased commission.

While not wanting to pour cold water on this, I presume that an identical deal is available to all IFAs or has the indirect benefit rule not survived the way that Regulatory Update 64 has.

Let us assume therefore that this will be coming to a firm near you or, better still, your firm. But wait, what of those firms who took the step of transition without this help, could it be backdated and, if so, can we have interest on the investments we made personally?

Seriously, instead of applauding businesses begging for the help of the providers, we should be asking who is paying for the extra commission or basis points in the end. This is just another reason that factory-gate pricing cannot come soon enough.

If I were a major IFA making the change on my own, I would be very angry at this developmentWe need to invest in our businesses if we are to prosper and we should not take the traditional route. After all, the insurers have a limited lifetime. They cannot all survive on wraps (if indeed any of them can) alone and when a protection wrapper make its debut, the clock will be ticking.

I started this article by suggesting that a trade body was not in line with reality and I end by decrying a firm for taking the old model approach to what is a new problem.

We need new thinking, not repackaging of old ideas.

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