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The best of this week’s online comments

Online comments relating to last week’s Nic Cicutti column: The pension industry’s dirty little secret

Looks like Nic had a silly lot of friends and was the only sensible one among them. The Endowment Mortgage I had, with the help of the good old Clerical, moved from house to house and was probably the best investment I ever made. The maturity value was far in excess of what I had expected and in the meantime I had had the benefit of life cover. The policy was designed as a long-term investment. Even the fairly thick among us should have been able to work out that there is a cost involved in writing a policy and this would have to come off any surrender value.

Michael Wainwright

That’s right, Nic, you keep stoking the fires of negative sentiment. Let’s make sure no-one is investing or saving for retirement by referring to the bad old days (by the way, I completely agree these were disgraceful contracts).

Let’s ensure the present generation do nothing to provide for their futures and never seek advice from the many good advisers out there. Of course, I’m being naive – the press just hate any positive encouragement and I should know that by now. Incidentally, fascinated to see you’re still saving into your endowment – perhaps you suspect it may be one of the many that have matured over the years with a decent sum?

Brenda Mellor

I would imagine providers were/are structuring charges on their products that recovered costs over the expected 25 year term (if anyone had sold a completely front-end loaded product, it would have looked horrific and no-one would have bought it).

If a customer stopped paying after thre years of the expected 25, then I can imagine the providers were keen to recover their chunk of the pot before it disappeared.

Lee D

Online comments relating to: PI insurer agrees 60% Keydata early settlement discount

If these cases do go to court, it will be interesting to see what material the FSCS presents in support of its claim that all these sales were defective, given that on most of them it hasn’t even seen the client files.

Does the FSCS plan to base its case on nothing but a blanket supposition of guilt, unsupported by any hard evidence? And what about the still unresolved issue that investors’ losses have arisen as a result of the failure of LifeMark the provider which, as noted above, was very probably entirely beyond the reasonable ability of any intermediary to have foreseen?

Then again, what can the FSCS be seen to say other than that it’s confident of success? Were it to say anything else, nobody would take any notice of any correspondence received from Herbert Smith. Many will take this issue to the wire, if only on the basis that they don’t have the means to pay what’s being demanded and therefore they have nothing to lose. That and the fact that they don’t believe themselves to be liable anyway.

And whatever happened to the due process of the existing individual complaints system? Why has the FSCS taken it upon itself to short-circuit this and pay out willy nilly on the basis that it will then be able to recover such monies from the IFA community with no burden of proof in proper law?

Julian Stevens

The story here is not that firms are settling, but that the majority are digging in, and will fight this all the way.

Unlike the Court of the FSA, where sentence is passed before the Court even sits, the FSCS will be up against the law of ‘causation’, where the Court will expect it to show a demonstrable link between the IFA’s advice/actions and the eventual loss.

Case law is quite clear here: no causual link, no liability, no compensation.

Yes, there may well be legal costs in a few years’ time, however, as this is rather speculative litigation, there is every chance that costs will be awarded against the FSCS.

The important thing is that this avenue is closed off for future reimbursement of FSCS payments – otherwise, a precedent may be set.

Paul

Online comments relating to article: Billy Burrows: Advisers should create their own fixed-term annuities

I have reached the same conclusion as Billy, if you are in drawdown and get ill you do not need a break option to buy an impaired life annuity!

Oddly enough being told you are about to die does not inspire many folk to go out and buy any sort of annuity.

The LV= break options do look a little more attractive than those of other FTA providers, but they all have the weakness that they do not insure against falling annuity rates. Someone who bought a FTA five years ago (had they been available) would now need close to a 50 per cent enhancement to break even with the annuity they might have bought at the outset.

David Trenner

It is an excellent idea from Billy and a real alternative to a Fixed Term Annuity, which are of course being hit by falling gilt yields (as is max GAD).

Charges need to be taken into account on the SIPP, although I have seen instances of these falling after several product launches.

Investing in SIPP deposit accounts isn’t straightforward either. (1.) Researching them has been traditionally hard, although there is a solution for this, see below (2.) The best rates are often from institutions covered by alternatives to the FSCS, you therefore need to do a little more research into the various compensation schemes (3.) Not all SIPPs allow unrestricted access to deposit accounts (4.) There are of course issues with breaking the fixed rate products if indeed an Annuity is required.

I do though think this option is a real alternative to a FTA.

Phil Bray

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