The FCA has written to platforms asking how they manage investors’ cash in light of the Consumer Duty, news reported in a scoop from New Model Adviser.
Money Marketing’s report includes the full question set, so is also worth a look. The issue has risen up the agenda given stories about just how much platform's income was deriving from interest. Some platforms have recently revised their policies in terms of sharing more with investors.
But it could pose a very interesting challenge to business models, one perhaps not forseen when the Consumer Duty was first planned.
The Labour Party held a summit with mortgage brokers last week to discuss what is increasingly being called the mortgage crisis. Shadow housing secretary Lisa Nandy and shadow chancellor Rachel Reeves attended as the party seeks to look like a government-in-waiting.
There was a significant amount of pensions news last week almost all on the workplace side. The Chancellor dubbed the package the Mansion House reforms with 9 providers undertaking to invest 5 per cent of assets in unlisted securities by 2030 in what was described as a ‘Compact’.
The 9 firms involved are Aviva; Scottish Widows; L&G; Aegon; Phoenix; Nest; Smart Pension; M&G; Mercer.
This has not led to particularly positive coverage in the pensions press not least because of the headline ‘boast’ that it could increase pensions by £1000 a year or 12 per cent. Many of the assumptions and comparisons have been criticised with AJ Bell. one of the major critics as reported by FTAdviser.
Much of the heavy lifting for that figure comes from starting auto-enrolment at 18 and removing the lower earnings threshold.
Pensions Age includes this quote from Aegon which sets out the providers' view rather neatly.
Aegon UK chief investment officer, Tim Orton, suggested that the Compact will create “opportunities that help deliver £500m assets under management target set for investments in climate solutions within its default funds by 2026 and as we progress towards net zero.”
“Trustees and managers of DC schemes are under a duty to act in the best interests of their scheme members," he continued. "As part of this, they should consider a wide range of investments, including private equity, for the benefit of the members. This is particularly true of scheme default funds where most members remain invested, leaving investment decisions to the trustees or manager."
Corporate Adviser reports on many in the pension sector slamming the proposals.
A poll of 200 pension scheme representatives found only 30 per cent are ‘broadly supportive’ of the Chancellor’s plans
There are also plans for the Local Government Pension Scheme to allocate up to 10 per cent in private markets and more to levelling up. Interesting to see different tones in coverage such as the following.
The government has threatened to force pension funds to pool assets according to the Local Government Chronicle.
Investment & Pensions Europe carries a great deal of criticism of aspects of the reforms and government demands. This is an interesting excerpt.
With no “stated intention to change regulation” in the Mansion House reforms, Clifford Sims, council member of the Society of Pension Professionals, said that the proposal to double LGPS investment in private equity is “less problematic” than its proposal to mandate a 5% allocation to the levelling up agenda.
Sims said: “Changing pensions legislation to require a 5% allocation to specific projects, however laudable, smacks of the problems that led the government to lose its Supreme Court case on requiring local authorities not to invest in a way that frustrated its defence and foreign policy aims. Put simply, funds’ fiduciary duty must prevail over government policy in non-pensions areas.”
It has actually been a little difficult to find a straight forward summary within the trade websites. First they have all focused on their own areas. Second there are a lot of promises, goals and undertakings amid actually regulatory change, but this analysis from law firm Linklaters is reasonable.
And this is also a summary of the main proposals outside of the Compact from the Government’s website below.
The 2017 Automatic Enrolment review measure – legislation is going through Parliament in 2023 which will enable savers to save from aged 18 (from 22 currently) and receive contributions from the first pound they earn (from £6,240 currently)
Addressing small pension pots – our consultation proposes a maximum pot limit and the creation of a central clearing house to support the delivery of a multiple default consolidator approach to ending the proliferation of deferred small pots.
Designing a value for money framework – our consultation recommends a value for money framework to assess across costs, investment performance, and services. This will also seek to include new powers for regulators to be able to wind up or consolidate consistently underperforming schemes
Decumulation in Trust Market – our consultation will seek views on placing new duties on trustees to provide decumulation services or partner with other providers to do so, and that this duty includes the offer of a collective defined contribution (CDC) first arrangement in decumulation.
Collective defined contributions – the consultation invited views on a proposed approach for broadening CDC provision to accommodate multi-employer CDC schemes and explored some key questions regarding decumulation only CDC arrangements.
One final aspect of the full reform package involves the possible rebunding of research costs yet the City of London reported in London Financial News doesn't sound grateful with this headline City brokers facing ‘existential crisis’ say Mansion House Reforms come too late.