Time is the key to the three different product types proposed by the Treasury today: short, medium a...
Time is the key to the three different product types proposed by the Treasury today: short, medium and long-term products to meet different investor needs.
The short-term cash vehicle - a rebranded CAT-standard cash ISA - will enable people to save without exposure to equities.
Medium term investments will be allowed in either collective investment scheme or lifer form, including using smoothing to lower volatility - despite objections from some responses that with-profits products would be too complex to fit into a regime for simplified products.
What remains to be seen is whether the proposals to allow smoothing, but not allow lock-ins or early redemption charges can work in practice.
The government is also keen to make all the medium-term products - unit trust, unit linked and smoothed investment funds - ISA-ble, although it wants to discuss this further with ISA manager representative bodies.
Medium-term investments will also be required to put a maximum 60% limit on equity holdings, despite arguments that higher ratios balanced against cash holdings could provide more flexibility with the same overall investment risk.
However, the 60% limit will be simpler to understand and easy to enforce, and it will not stop companies from developing funds with lower equity exposure if they believe there is a market for such products.
In line with the objective of limiting risk to investors, any funds developed would also be required to limit exposure to long-dated or sub-investment grade bonds, and only use derivatives "for purposes of efficient portfolio management".
The long-term product should be a rebranded stakeholder one, in order to avoid confusion between two separate simplified pensions products.
Term assurance, annuities and financial health checks are to be excluded, as are guaranteed products because the latter involves investments within fixed time frames, which does not fit the flexibility requirements of the Sandler suite.
Speaking at Professional Adviser's conference
Equity release panel
Speaking at PA360
TISA's Peter Smith
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