In his latest monthly installment, the CII's David Thomson provides an update on the key regulatory events of the past few weeks and takes a look at what can be expected next...
Auto-enrolment reached its first anniversary in 2013 and the Department for Work and Pensions (DWP) has published its first annual evaluation of it. The document includes the latest updates and shows progress against the baseline through the use of available research and analysis.
This baseline was established in 2011 when the DWP published its evaluation strategy, and a year later it launched a comprehensive report on the topic. This describes the landscape before the implementation of auto-enrolment and sets out the key indicators against which progress will be measured. Some of the key findings show that, up to the end of October, more than 1.9 million workers had been automatically enrolled across nearly 3,000 employers.
In his latest monthly installment, the CII's David Thomson provides an update on the key regulatory events of the past few weeks and takes a look at what can be expected next
So far, the results are encouraging, with the average opt-out rate being about 9%. Almost two thirds (73%) surveyed also said it was a good thing. However, the next couple of years will be crucial as the roll-out moves to medium and small firms. The role of advisers in guiding these firms will be important in delivering a soft landing.
In another regulatory update, the Treasury Select Committee has stated it will not be reviewing the Retail Distribution Review (RDR) until 2015. Speaking at a recent industry event, chair of the Select Committee Andrew Tyrie indicated that a review of the impact of the RDR is not necessary until the reforms have "worked through the profession", which is likely to take at least two years. This time will allow the true impact of the changes to come to light.
Tyrie also voiced his concerns over the 'cliff-edge nature' of the reform programme and the fear of considerable loss of advisers and firms. The consequence of this loss would be a lack of competition within the market, subsequently resulting in a detrimental effect to the consumers with a softening of rates. The impact on consumers, and whether or not the changes have been beneficial, is something the Treasury Committee has continued to monitor since the RDR began.
Trust and confidence
Finally, the Financial Conduct Authority's (FCA) director of supervision Clive Adamson delivered a speech to the Insurance Institute of London in November, where he focused on public trust and confidence, including the need to ensure firms' ethics are built around the needs of the customer. Adamson outlined the need for the FCA to work with the industry to enhance public trust in the sector and to ensure customers know they are receiving the service they deserve.
Other key points made by Adamson included how the FCA has been established to supervise the delegation of authority and to ensure particular attention is paid to those who have been taken on to do this role. The FCA, therefore, must ensure it has the skills, capability and adequate information to handle claims in the expected and proper manner.
Further key points include the FCA's focus on how firms demonstrate integrity and consider its customers through the way they handle claims, as well as the need to ensure there is effective oversight into the reduction of financial risk in the sector.
Adamson also announced it was undertaking thematic work looking at how conflicts of interest are managed and ensuring this is done to a professional standard which avoids adverse behaviour towards their client. His speech concluded by saying he believed the role of the regulator is not to hinder but to constructively assist and enhance the services provided to customers by the industry as a whole.
Keep an eye out for...
The Scottish referendum (on 18 September) is one of the most important constitutional events in British politics for 30 years. The Scottish government recently published a white paper on the implications of a 'yes' vote and there has been much debate over the effects.
One anticipated change is that an independent Scottish government would bring in its own markets and financial services regulator, similar to the FCA. It is likely the Financial Policy Committee and Prudential Regulatory Authority would retain their roles.
There is also speculation around a change in currency. Although this cannot be ruled out, the white paper suggested this is unlikely - Scotland would see the benefits of retaining the pound, in order to have the Bank of England monitor the UK financial system.
Political parties will be increasingly vocal in their views. However, it will be interesting to see if the voice of the financial services sector - particularly important historically in Scotland - is heard.
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