Here's our weekly heads-up on the stories that may have caught your clients' attention over the weekend ...
Avoid these expensive investment funds
In the wake of the Asset Management Market Study, recently published by the Financial Conduct Authority (FCA), this Telegraph article calls on investors who decide to buy a passive fund to be careful they are not being overcharged.
While the FCA warned some £6bn of private investors' money sits in expensive versions of funds that track a stockmarket index, this piece highlights research from the lang cat, which calculates more than 10 times that - £64.5bn - sits in passive portfolios where the ongoing charges figure (OCF) is above 0.5%. The research consultant does point out it has included ETFs in its calculations whereas it is assumed the FCA did not.
Speculating why some investors might be paying an OCF of up to 1.5% for a passive fund, lang cat consultancy director Mike Barrett points to some well-known providers among the higher chargers and says: "I feel like those are the types of investment people will be buying directly - through their bank or because they recognise the name as a trusted brand. People read about passives being a good idea and then they go to a trusted brand to buy it."
For his part, FE portfolio manager Oliver Clarke Williams is quoted as saying that cost is not the only consideration for investors in passive vehicles and factors such as tracking error and fund size are also important. OK, but still - a 1.5% OCF ...?
Forget Black Friday - buy into a pension while tax reliefs last
Merryn Somerset Webb uses her FT Money column this weekend to urge people to forget the Black Friday frenzy and instead direct any spare cash they have towards their pension savings, on the basis the days of higher-rate tax reliefs are numbered - "whatever the Treasury says".
She admits she has been predicting this for some years now but picks up on Philip Hammond's Autumn Statement comments that pension tax relief is the "most expensive" of all reliefs. With some two-thirds of this going to higher and additional rate taxpayers, the Chancellor noted that, while the government is keen for everyone to save for old age, "it is important that resources focus where there is most need".
That being so, observes Somerset Webb, "the point of incentivising people to save is to support themselves in their retirement. It isn't to make sure the well-off stay well-off. It is to ensure that as many people as possible save enough to support themselves in old age, so the state doesn't have to. That's it. All the complications and fiddles introduced by Gordon Brown and George Osborne come down to this and this alone."
While the Treasury apparently assured the FT last week the chancellor has no plans to announce any further changes to pensions tax relief, Somerset Webb reckons "he most certainly does have plans" and, if he does not, "he most certainly should have - cut tax relief to 20% a year for everyone and you'd save going on £15bn a year. And if anyone needs to save £15bn a year it's the UK government".
Triple lock gets Treasury's vote ... until election day
Chancellor Philip Hammond may also have taken the opportunity of the Autumn Statement to reassure pensioners the government would live up to its manifesto pledge to continue with the so-called triple lock for the duration of this parliament but, as this Sunday Times article points out, that only takes us as far as 2020.
The triple lock - the mechanism by which the government increases the state pension each April by the higher of growth in average earnings, the Consumer Price Index or 2.5% - has proved a popular measure with a key demographic for all political parties, but also an expensive one.
The article highlights a passage of Hammond's speech from last Wednesday where he said: "As we look ahead to the next parliament, we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability. And so the government will review public spending priorities and other commitments for the next parliament in light of the evolving fiscal position at the next spending review."
It then quotes Hargreaves Lansdown head of pensions Tom McPhail: "The Chancellor's wording is a strong hint the triple lock won't be around for much longer."
The chairman isn’t answering his email
Reforms not enough
An economic cocktail
To encourage consumers to shop around
Will report to Pat Shea