The FSA launches a probe into current pension rates

The FSA launches a probe amid concerns UK pensioners are getting a poor deal for their pension savings. 

The FSA investigation seeks to evaluate current pension rates offered to retirees when they sign up to an annuity, which provides them with a set income from their pension fund.

What constitutes an annuity?  In simple terms, it is the income you get from your pension once you retire.  The amount of income will depend on the total value of the pension you have saved up throughout your working life.   The more you have saved, the more money will be paid out on a monthly basis once you retire.

What many pensioners don’t consider is that they might be losing out by not shopping around for an annuity, a market that is worth today £11bn.  As per the open market option, retirees can take their pension pot and shop around amongst other providers for the most competitive annuity deal.

Is it worth it?  Absolutely!  This will be surprising to many pensioners who quickly assume that the difference may be insignificant on the basis that the underlying product is the same.  However, statistics show that there can be a variance of up to 20 per cent in the rates offered by different providers between the best and worst deals available on the market today.  This means that some retirees could be missing out on a substantial potential boost to their incomes.  In fact, an annuity purchase is one of the most important one-off financial decisions that you can make and the one that will have long-term consequences if you get it wrong.

The open market option was introduced back in 1988 however historically the take up has been low.  Only about 40 per cent of pensioners actively shop around before taking an annuity, with the majority directly accepting the rate offered by their current pension provider.   The FSA is looking to change this trend by compelling pension providers to disclose to customers that they have the right to compare different options available to them.

In reality, the insurers have been obliged to tell pension savers of their right to shop around since 2002, but the current probe will determine whether these firms are doing all they can to make this transparent and clear to their customers.  The regulator will be examining both the pricing of the annuities as well as the marketing and advertising involved in promoting these rates.  Furthermore, it will then check the individual providers to see whether their existing practices in fact help to encourage a person to shop around or actually make it more difficult for them to seek a more competitive option.

While this probe could have positive implications for those buying annuities in the years to come, it won’t provide much consolation for those unlucky ones who are seeking to purchase a retirement income now.  Adding salt to the wound, the cost to buy a retirement income has spiked in recent years due to measures implemented by the Bank of England in order to ease the financial crisis.  Maintaining the UK bank rate low at 0.5 per cent for almost four years and injecting some £375bn of new money into the economy via quantitative easing, had the effect of depressing the yield on gilts.  Because annuities are linked to the yield on 15-year gilts, it means pensioners get much less for their saved money.

You still get what you pay for!  About 40 per cent of retirees who do shop around, manage to get improved annuities after receiving financial advise.   Considering other options for an annuity can lift your income by a considerable margin, while for those pensioners who have particular medical conditions or lifestyle choices that may decrease their life expectancy below the average statistics, can increase potential retirement income even further by them qualifying for an enhanced annuity.

The market has indeed seen much innovation and increased choice for pensioners over the last few years, which means that many more potential options are available on the market to those who take time to look.  There are various options to consider such as lifetime annuities, those linked to investments, fixed term annuities, fixed and capped drawdown, phased retirement and many others.

We can only emphasise the importance of financial advice to ensure that your retirement planning is on the best track possible.  Think about it like buying a car insurance, you don’t take the first quote!

If you would like to receive more information about various pension-planning options available to you, please do not hesitate to get in touch.  We will be happy to be of assistance!

Weekly Update 10 August 2012

If markets could only follow the Olympic spirit that currently pervades London we might see a reflection between value and perception, something that still evades most asset classes at the moment. Let us start with European Bond prices, in particular those of Spain and Italy which yet again saw a significant spike last week well beyond the 7% “point of no return”. Is this price deserved? Perhaps not, however it was not helped by rumours of Spanish officials privately talking about seeking a €300 billion bail out. The problem is that we seem to be stuck in some sort of Euro policy ground hog day type scenario, the difference being that as each economic crisis re-occurs the policy makers make the same reactive mistakes as opposed to learning and adjusting. Until this cycle is broken, we see the Euro as an unsafe bet and I would expect to see it drop on both the sterling and the dollar in the medium term.

In the UK data continued to be weak with a variety of innocuous events being blamed, from Jubilee weekends to the dismal British summer. We expect another rate cut this year and would be surprised if it didn’t come sooner rather than later and yet again we are hearing sabre rattling from the Bank of England over the amount of loans being dished out to SME’s, designed to stimulate economic growth at a more grass roots level, the traditional path out of any recession. As such we are once again looking at stocks and funds that specialize in this section of the economy, for those with a medium to long term buy and hold strategy we feel confident that this will deliver returns.

Meanwhile in the US the bullish attitude seems to be hanging on, validating our stock picks last month and offering a comfortable short term profit taking opportunity, always a satisfying moment to say “I told you so”. With important pay roll numbers coming out this week we remain confident on US exposure and feel that there is a plethora of undervalued assets still available. Given what US deposits are earning we’d encourage those with the appetite to consider getting back into the market now more than ever.

If you would like more information on anything of the above please don’t hesitate to get in touch with us at


Weekly Update 11 July 2012

The rally that we witnessed last week has yet again proved to be a dead end and there has been a small pull back in most markets as a result. Yet again Europe seems to remain rudderless and after countless summits and conferences, the only real result seems to have been some €30 billion released to Spanish banks and a further entrenchment of policy by Germany and now even Finland against a Eurozone bond type of undertaking and coordination. This has driven the Euro lower and, we feel, it still has some distance to go, whether it can last even in to the medium term in its current format is a debate for a much longer article than this one but we would encourage clients with large Euro deposits to get in touch and discuss a wider portfolio of currencies.

Further to the worry with the Euro, we also feel that the Swiss Franc is coming under almost unbearable pressure too and could possibly see itself being re-pegged, again in the not too distant future.

After last week’s lower than hoped for non-farm payroll numbers out of the US the market is watching Mr Bernanke’s every move as he has previously committed to a further round of Quantative Easing should the US recovery slow any further. This has happened and now we’re waiting with baited breath. However, in our opinion this has given a buying opportunity for some targeted purchases. With some early signs of life in the US housing market we would still perhaps not advise jumping back into property development companies per se but, as with our oil and gas industry strategy, look at supporting and ancillary sectors with wider revenue streams that are not only pegged to one “commodity” price. They are underpriced in our mind and will, in the medium to long term, provide ample growth with relatively low volatility.

China has shown signs of a “slowdown” but given its traditional blistering pace of growth and hawkish behaviour of policy makers we remain bullish on the country, its appetite for consumer and luxury products seems to know no end providing perhaps well priced buying opportunities for the companies here in Europe and the US that cater to this appetite.

In the UK we see, in conjunction with the additional quantative easing a further possible rate cut occuring. This would punish savers and deposit holders even further and with the average interest rate already being so low it’s easy to see that cash is losing value now even faster. Those with fixed term deposits and large cash holdings should be diligent to check on their rates and when each one matures to avoid waste.

With cash rates so low there has been a rush to the “safe haven” of bonds producing lower yields, for those seeking to add value to the portfolios we would encourage, where possible, a longer market view or a focus on dividend stocks which still offer higher returns than most fixed instruments but with the combined advantage/disadvantage of possible price movements.

Politically there is not a lot on the immediate agenda so the markets can get back to focusing on actual results as opposed to sentiment driven reactions, a welcome change in our view!

For more information on the above and anything else which might be of interest please don’t hesitate to get touch with us at


Weekly Update 30 June 2012

Another week passes and it seems that the markets took centre stage over the politicians this week, albeit briefly, with a lack of direction or impetus appearing from any political camp. The new Greek government, which gave a brief market rally, seems to have mostly collapsed with varying ailments, apparently without a sense irony. In the US the expected round of economic stimulus seems to have failed to appear despite weakening economic data which has pulled the S&P back from its brief foray into the 1360 territory, the first since May. This has largely quashed growth in the US equities market though the continued uncertainty with oil prices offers some good value stocks, not so much in oil companies directly but in oil servicing companies, an area we would advise to be bullish in.

In our opinion the most interesting development in the market this week is the mass downgrade of some of the highest profile “brand” banks. This seems to have been largely priced into the market already with a muted reaction across the board apart from Morgan Stanley, who having managed to avoid the worst of results experienced a jump in share price.

We live in interesting times when easy profit can be sought through second guessing rating agencies. However, we feel that this move was merited and whilst it hasn’t helped returns this week at least re-enforces the role of rating agencies in the markets, a welcome change from the controversy that surrounded them a few short years ago.

The major area of weakness to keep an eye on is Spain and its banks. The Spanish government formally requested a €100bn bailout for its banks;an independent report found it need €62bn to provide a buffer from further bad debts. Yes admittedly Spanish sovereign borrowing has pulled back from the brink, a re-assuring sign but here at we remain unconvinced that the Spanish government can really see this plan through. Senor Rajoy, we feel, is not being as forthcoming perhaps as he should be and we would, as last week, continue to advise clients to move out of the Euro if possible or go short. Gold has again seen a rally as has the USD and even Sterling as safe haven investments away from the Euro.

We shall see what comes from the EU summit but we cannot help but feel now that the real fly in the ointment is rapidly becoming Germany. Mrs Merkel is appearing more and more politically paralysed at home and the far reaching reforms that are needed to save the Euro perhaps would not be acceptable to a population that has never actually had a referendum on the Euro itself.

In Britain Moody’s the credit rating agency downgraded the credit ratings of all of Briatin’s high street banks as part of a major worldwide downgrade of bank ratings, which also saw those of Goldman Sachs, Morgan Stanley, UBS and Credit Suisse slashed.

Oil price remains rather muted, giving a welcome break to inflationary figures, particularly in the UK where we await the decision regarding further quantative easing and the ensuing market rally.

If you require more information on anything describe above please don’t hesitate to get in touch with us and the team at .


Weekly Update 17 June 2012

Seven more days pass and turmoil in the markets continues. Following the carnage of two weeks ago and global stock markets tentative rebound on hopes of a fresh stimulus from central banks and Spain’s €100bn bailout last week. Their rally swiftly evaporated as markets digested what the deal actually meant.

However, the Bank of England announced on Thursday that it is announcing a dual stimulus package. One, in combination with the Government the Bank of England will provide cheap credit for the UK Banks – consequently UK Banking shares rose sharply on Friday – including the R.B.S. which rose by over 8%, Lloyds TSB rose by over 5% and Barclays Bank rose over 4%. Secondly the Central Bank announced the Extended Collateral Term Repo Facility which was suggested back in December 2011 has now been enacted. This means that UK Banks will now have access to short term money to deal with exceptional market pressures. Therefore banks are able to borrow at least £5 billion every month to cover any shortfalls in ready cash which they will then be able to lend out to borrowers including individuals and companies.

As well as anxiety about the burden it would add to Spanish sovereign debt, bondholders were unsettled about where the cash will come from. If the New European Stabilisation Mechanism is used, existing bondholders would become junior debtors – raising the chances of sizeable “haircuts” in the event of a default or restructuring. The jitters pushed yields on Spain’s ten year bonds above their pre-bailout level to a euro-era high of 6.81%. The deal left Ireland, Greece and Portugal questioning the terms of their own, more stringent, bailout terms.

There was further evidence of flagging growth in BRIC (Brazil, Russia, India and China) countries. Furthermore US factory output figures in May fell 0.4% against a rise in April of 0.7% in statistics released by the US Federal Reserve last week. This compounds the statistical concern emanating from the United States where retail sales also have fallen by 0.2% in May. Consumption accounts for around seventy percent of total economic output in the USA and consequently these figures are watched very closely by not just the US but by global markets.

Furthermore in the US the unemployment rate increased from 8.1% to 8.2% in April this is despite a recent report by the US Federal Reserve which has stated that US growth is growing.

China cut interest rates for the first time since 2008, ahead of figures showing that manufacturing and consumer spending had flagged in May. For borrowing the Chinese central bank deposit rates were cut by .25% from 3.5% to 3.25% and loans were reduced from 6.56% to 6.31%. Furthermore they have held back from implementing stricter rules to prevent this from impacting further on the Chinese economy as China is concerned about the state of the World economy and subsequently is determined to try and stimulate the Chinese domestic economy through domestic consumer spending.

Standard & Poor’s warned it may downgrade India’s credit rating. The Bank of England ignored IMF advice and kept interest rates on hold at 0.5%, and made no move to introduce further quantitative easing.

Preliminary estimates of Jubilee sales looked good: Tesco reported its biggest ever week outside Christmas, with £1 billion  in sales. They came too late to affect its Q3 figures, which showed a 1.5% sales decline.

For more information on above or anything else in finance please contact us here at


Inflation Anticipation Rises

The new Bank of England Inflation Attitudes survey has just been released suggesting that inflation expectations within the country are continuing to rise this is despite the continued fall in the Consumer Price Index to 3.0% over the last 3 months, the lowest it has achieved in the last 2 years. This will continue to give cause for concern to the already embattled Bank of England which has a government appointed target of 2%.

However for the last 2 and a half years the Bank of England has been unable to achieve this rate. This consequently has led to satisfaction in the way in which the UK Central Bank has been able to handle the UK monetary policy reducing from 20% to an all time low of 11%.

The Bank of England Governor, Mervyn King and his Monetary Policy Committee decided last Thursday that the continued fall in inflation did not merit a restart in their Gilt Purchase Scheme. Which has seen the Threadneedle Street institution hold off from expanding its £325 billion quantitative easing programme began back in March 2009 when the bank injected £75bn into the economy. This method of the central bank buying assets, such as government or commercial bonds. This has not had the desired effect of increasing the willingness of banks and institutions to spend, even though they have greater liquidity as a consequence of the quantitative easing policy. Although in a Bank of England report they claim that it has helped increase the UK’s Gross Domestic Product from 1.5% – 2%.

Interest rates continue to be held at a historic low of 0.5%. These were in the past used as a method of stimulating the economy. As the lower the interest rate the more disposable income individuals had as the cost of borrowing would decline.

The NOP report commissioned for the Bank of England surveyed some 1,966 people and the results not only showed that short term inflation was predicted to decline, but also the medium forecast the survey predicted would rise to 3.4%  from 2.9%. This is despite the fact that the Bank of England believes that by Quarter 3 in 2013 inflation will have returned back to 2%.

With inflation currently standing at 3.0% it is felt that with food inflation flat lining and commodity prices  slackening off this has helped to offset rising distribution and property costs which continue to expand.

There are many negative effects associated with rising inflation. Firstly inflation can adversely impact on savers, for if they are saving when interest rates are at 3.5% but inflation is at 3.7% they will be in effect losing 0.2% annually. Secondly international competitiveness can be effected if one country’s inflation rate is significantly different from its neighbours as their prices will be rising at a higher rate than their opposite numbers consequently impacting on their trade balance.

For businesses, higher inflation rates make it harder to budget and plan for the future when they don’t know how prices will hold in the future. Lastly for businesses higher inflation rates can place greater pressure on wage demands and expectations because their employees will expect to be paid at least in line with inflation.

If you require more information on this or anything else to do with the UK economy please don’t hesitate to get in touch with us here at


UAE introduces new regulatory body

A new organization, called the Financial Services Authority, is to be established in the United Arab Emirates in one of the biggest changes made to their financial and banking system in over 30 years. The regulations were brought in as a consequence of the UAE Government wishing to strengthen their regulations to help protect the sector from another international financial crisis. The change is in the regulations is designed to enhance management of the financial market and prevent any future economic downturn from resulting in mismanagement of the financial sector within the UAE.

The UAE Establishment has opted to shift to a duel regulatory model. It will mean you have two authorities for the finance industry – a prudential regulator and a conduct-of-business regulator.

Responsibility for the day to day operation and conduct of business within the financial sector in the UAE will transfer from Central Bank to a strengthened up Securities and Commodities Association. This has been re-labeled as the Financial Services authorities.

This new authority will have management of customer security protection, guarding against unlawful and unethical behaviour and the day to day operation of the financial system within the UAE. As with the SCA, it will be centred in Abu Dhabi and the organisation will take on more personnel to satisfy its new mandate.

The SCA will work in harmony with the UAE’s Central Bank and will stay as the prudential regulator, which will continue to take a strategic view of the economic situation and help to manage the finance sector together with the previous old encumbent. Plans to renovate the 1980 financial act were declared by the UAE’s Central Bank last month, but information of the changes are only now being released. Authorities anticipate a first writing of the new bill by the end of the year with it becoming law hopefully within the next 18 months.

It is a vital aspect of a wider strengthening of the laws surrounding bank lending in the UAE which have been given as one of the principle reasons behind the international financial meltdown of 2007-8. They believe that their proactive stance will stand the country and region in good stead in the future.

Experts believe the UAE have based their duel regulatory approach on the system that is being used in Australia, which has been able to withstand much of the global economic crisis. It is felt that by giving authority to only two organisations rather than a plethora of self interested parties as seen in the USA, this will put them in the best position to act quickly and effectively.

However the UAE has not completely based its system on the Australian style as the Central Bank in the UAE will not be overseeing the regulation of the retail banking sector during the handover period for up to 4 years. Investment Banks, the insurance industry and all other financial organisations in the UAE will however be regulated by this new authority. Authorities say the new Financial Services Authority will not overlap with the Dubai Financial Services Authority, which controls how the financial services industry operates in the Dubai International Financial Centre.

The shift to set up this new system and organisation confirms the UAE’s Government is intent on enhancing the perception of Abu Dhabi as a safe, professional, advanced economy. The Financial Services Association within the UAE sees this as a change for good. For more information on this and anything else going on within the international financial services sector. Please contact us here at


The Week That Was….

At we felt that it would be helpful to provide an brief overview of the past weeks main stories both in the UK and around the world. If you have any questions or points please don’t hesitate to get in touch.

Sterling climbed to its highest level against the euro in almost 2 years on continuing concerns about the deepening crisis in the Eurozone. France elected socialist candidate to President, Francois Hollande, much to the dismay and concern of many of the other Eurozone leaders. In particular Angela Merkel who believes that the Eurozone countries should be following a goal of austerity meanwhile Hollande is promising to renegotiate eurozone government debt to concentrate on promoting growth.

Spain has confirmed that it has slipped back into recession and as a consequence has had its credit rating cut to BBB+ by Standard and Poor’s which cited the risks posed by the country’s banks. The Spanish economy reduced by 0.3% from December 2011 to March, a 2nd consecutive reduction in economic growth. Fortunately these results were not as bad as had been expected by economists.

Because of the poor economy and the associated concerns with paying back loads and correcting their growing public deficit this drove up the cost of borrowing, increasing the threat of the country requiring a bailout by the other Eurozone countries.

Not only did Standard and Poor downgrade the countries credit rating, in light of the concern with the Spanish publics ability to repay their debt. Standard and Poor downgraded nine of the Spanish Banks, including Abbey National owner Santander and BBVA.

David Cameron drew criticism from European politicians for his assessment that we’re not “halfway through” the economic crisis.

In the US, the Dow Jones hit its highest level since December 2007 following stronger than expected manufacturing figures.  Manufacturing had its fastest growth for 10 months, the fastest infact since June. Orders, production and hiring rose during the period. President Obama is increasingly sounding confident which will stand him in good stead for the upcoming Presidential elections. US employment figures within manufacturing also are continuing to rise. They being at their highest rate for the last 9 months. World markets will follow closely this Friday’s monthly US employment figures.

Economists at the Ernst & Young Item Club predicted that losses on corporate loans in the UK will hit their highst level since the 1990s recession this year, fuelled by the weak consumer sector.

Both HSBC and the Australian owned  Clydesdale and Yorkshire banks announced further job cuts. The “magic circle” law firm, Herbert Smith, blamed stagnant deal market for job losses in its City office.

Lloyds Banking Group cheered investors by notching up a profit of £288m in Quarter 1, despite setting aside a further £375m to cover PPI claims. BP reported a $4.8bn profit for the quarter.

The UK High Court ordered UK internet providers to block access to the file sharing website Pirate Bay. Microsoft invested $300m in the US bookseller, Barnes and Noble to develop an e-reader called Nook. Apple and Samusng are planning a peace summit to end their bitter litigation over smartphones. Several dozen protesters were arrested outside the London Stock Exchange after May Day protests.

For more information on the week that was…. please contact us here at


UK Inflation Rises to 3.5%

UK inflation rates have unexpectedly risen to 3.5% despite rising unemployment and stagnating economic growth. This is another blow to the embattled Conservative Chancellor, George Osborne who continues to take a hammering following his budget last month. Furthermore it will require the Bank of England’s Governor, Sir Mervyn King, to have to write a letter to the Prime Minister, David Cameron, detailing why UK inflation is above the Governments target of 2%, a figure that the Bank has failed to meet for almost 5 years.

Since 1997 when Labour came to power under Gordon Brown the Chancellor, the Bank of England have been required to maintain inflation under the Governments target of 2% using only interest rates and through quantitative easing which the Bank has done since the financial crisis of 2007. The inflation figures measure the difference between current prices and prices of a basket of goods and services from 12 months ago.

The Office of National Statistics published the poor results, much to the surprise of City experts. The majority of whom believe that this small rise will only be a slight blip in the downward trend in UK inflation that has been seen since September last year.

The rise has been put down to the growth in food, clothes (in particular women’s clothing) and soft drinks in comparison to prices a year ago, in March 2011. Supermarkets 12 months ago were involved in a particularly strong price war which suppressed food prices, mainly meat, fruit, vegetables and bread. To a lesser extent, but still importantly computer games, clothing and DVDs also affected the rise in UK inflation. This rise will add additional pressure to the Government as inflation affects consumer confidence places additional strains on households whose salaries are not rising at the same rate as their household costs.

Fortunately, fuel prices (gas/electricity) were markedly lower than 12 months ago due to energy companies reducing prices against raising prices a year ago.

Whilst the consensus in the City is that this rise is not in line with the downward trend the fear is that it will motivate the Bank of England’s Monetary Policy Committee to hold off from another period of quantitative easing. Between March 2009 and May this year the Bank has established a £325 billion quantitative easing program. The fear is that this has not had the required effect and any high inflation rate will dissuade the Bank to reduce interest further and subsequently increase its quantitative easy program any more.

These results follow on the back of the average annual salary growth rate figures of only 1.4% in the UK and average prices have only been growing by a paltry 0.3%. All leading to a squeeze in consumer spending further stifling the economy. It is hoped that with the upcoming Diamond Jubilee and London 2012 Olympics that this will provide a boost to the economy, however these are only a few lights on the horizon.

The recent poor economic data will not be helping the Coalition’s beleaguered government and as a consequence it is predicted that both the Liberal Democrat and Conservative parties are going to find it challenging in the upcoming local elections on 3 May 2012.

For more information on the current state of the UK economy please click here.


RDR Guide is to be Published

The Financial Services Authority (FSA) has promised to publish a guide outlining the changes being brought about by the Retail Distribution Review (RDR) which will be enacted in from 1 January 2013.

The FSA has repeatedly stated that in the run up to January 1st 2013 they will be publishing and publicising how the new regulations will affect investors, pensioners and families in the United Kingdom.

Up until now there has been a fair amount of criticism levelled at the FSA as very little has been put in the public domain which will help the British population understand why all these new regulations have been put in place.

However they are adamant that with the help of the Money Advisory Service and other publicly funded consumer organisations that the UK populace will be fully up to speed. The RDR has brought about changes with a view to improve the reputation of the UK financial services institutions, protecting consumers from being miss sold and poorly advised.

Information will include adverts, improving the FSA hand books and publications which are currently out of date, re-invigorating its e-services and teaching its advisers so that they can transmit the reforms to the general public. We wait to see whether or not they truly do bring through the appropriate improvements to the current woeful publications that are available to the general public.

It often is down to the likes of privately run websites which impart the best information, but trying to get a hold of this for the older generation who are not as experienced and adept at using the Internet means that many will not have up to date information.

There continues to be criticism that since the banking crisis of 2007 the Retail Distribution Review has not adapted to the changing world in which we live. Many feel that during the vast majority of all advisers in the 30+ years they would only receive 1-2 complaints, of which it is likely that only one would be upheld.

The accountancy and legal professions would be incredibly proud if they were able to achieve such low levels of complaints. But it is these groups which has motivated the Financial Services Authority to improve the perception of Independent Financial Advisors as a respected professional body. By reducing the ability of IFA’s to make scandalous commissions on some of their work and to make sure that the advice being given by the advisors is clear, appropriate and timely.

However many are concerned that the new regulations coming in to force next year will move many advisors to start putting together a series of model portfolios which they will “top and tail” to fit in with their clients position. This is as a consequence of the concerns that the advisors are placed under an undue amount of regulation and compliance which they must adhere too and would take too long to work through for every client.

Time will tell if the new reforms will prevent individuals having truly tailored advice to their needs.

For more information on RDR and its impacts contact us here.