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Year to Year: 2000

The year 2000 saw the launch of Money Marketing’s Poles Apart campaign in defence of polarisation, asking politicians to justify their decision and how it would help the industry and consumers. It failed but it made the powers that be reflect on the problems that depolarisation might bring.

The year opened with life offices beginning a cut-throat stakeholder charge war when annual costs on pensions began to dive below the 1 per cent cap. And MM would later lead on the story of actuarial research demonstrating how stakeholder could plunge pension companies into a decade of losses.

The start of the year also saw the continuation of the tech frenzy with investments in tech funds riding high.

Chartwell investment analyst Ryan Hughes remembers that it was all anyone could talk about: “People who would not normally be involved in the investment world were talking about how much money they had made that day. Both investors and IFAs were getting sucked into ‘the next big thing’, regardless of whether this was appropriate.”

In March Chancellor Gordon Brown delivered a boost to investors and advisers by maintaining the £7,000 Isa limit in the Budget. May brought the merger of Norwich Union and CGU. NU was now the biggest product provider.

In June, Standard Life saw-off would-be carpetbagger Fred Wollard back to Monaco after votes in favour of demutualisation fell short of the 75 per cent target required. But the near 47 per cent of voters who had favoured an end to mutuality had given Standard a bloody nose. Chief executive Scott Bell summed up sentiments, saying: ‘There will be no champagne tonight.” June also saw an industry-changing event when Fidelity set up FundsNetwork but a gang of four fund management refuseniks were working hard on Cofunds.

Hargreaves Lansdown pensions research manager Tom McPhail says: “I remember speaking to some Standard Life employees, it was like speaking to robots – they all seemed to have a strange light in their eyes and would all trot out this mantra about the benefits of mutuality. It was a testament to Standard’s spin doctors.”

In July fears over multi-ties were growing as the London Economics study into polarisation was finally reported.
The front page of MM reported the IFA sector would suffer extensive damage if the main recommendations of the FSA commissioned report were implemented.

By November, MM was providing a forum for the united front of IFA leaders and the Consumers’ Association in the face of Treasury plans to replace polarisation.

CA senior policy adviser Mick McAteer said at the time: “Polarisation was never perfect, but there is no justification for this proposed overhaul.”

Equal Partners managing director Vivienne Starkey says: “I responded to two papers on the changes to the polarisation regime. Once the end of polarisation was discussed, it was never going to stay. What was up for discussion was what was going to replace it.”

Going back to the summer of 2000, the debate over mortgage packagers hit the headlines, not for the last time, with the OFT receiving complaints over their fee disclosure position.

While in August, MM reported former Jupiter boss James Duffield was pushing ahead with plans to start a fund company, despite claims by Jupiter parent company Commerzbank that the move could be a breach of contract. Duffield had already

registered the New Star Asset Management name through lawyers and bought relevant web domains.

Hughes says: ‘The story perhaps didn’t show the industry in the best light, but what emerged from it was a company that’s gone on to dominate the unit trust market, continuing to advertise through the bad times, a strategy that continues to pay dividends.”

September was a big month for pensions, with the TUC being warned by the UK’s biggest trade union Unison that stakeholder pensions would not work without advice.

This echoed LIA response to an FSA consultation on stakeholder which posited the low-cost pensions would fail to reach its target audience without the input of IFAs.

In the same month the Social Security Secretary Alistair Darling unveiled plans for the pension credit, designed as a top up payment to reward people for modest savings. Some experts saw this as an added layer of complexity which would demand professional assistance.

September also saw pension providers begged the Government to put plans for individual pension accounts on hold, due for launch alongside stakeholder in April 2001. It was feared IPAs, which ultimately failed to materialise in a commercial sense, would have added yet another extra layer of detail and potential cost.

Martyn Arbib sold Perpetual to Invesco for £1.1bn in October.

The year ended with the FSA under pressure to hold an enquiry into the demise of Equitable Life and to assess whether there were any other insurers likely to face similar fiascos.

Peter Young was found unfit to stand trial for the £200m fraud in 1996 in his role as fund manager at Morgan Grenfell.
Then pensions minister Jeff Rooker, however, was optimistic about the future when he said that he hoped to see the take-up of stakeholder pensions in the next four years reach 2.5 million, a number equal to half of the target market of people earning between £10,000 and £20,000 a year.

Scottish Life head of communications Alasdair Buchanan says: “History seems to have been somewhat re-written over who was the target market for stakeholder. It turned out that the Government was quite happy for stakeholder to be used by well-off people for their children and grandchildren, not for modest-earners yet to have pension savings.”

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