Ban On Commission-Based Selling For Financial Advisers

28 December 2012 •

Financial advisers are no longer allowed to receive commission on the sales of financial products under new rules in force today.

Under the Retail Distribution Review (RDR), financial advisers will instead have to charge upfront fees on the sale of products such as pensions, loans and saving accounts.

The move by the Financial Services Authority (FSA) is designed to create a more transparent and fair charging system and to help prevent the risk of mis-selling, it said.

Establishing what the FSA calls a 'resilient, effective and attractive retail investment market that consumers can have confidence in', the RDR aims to protect consumers across the retail investment market and will:

  1. Replace commission-based selling with a transparent charging system - advisers will have to explicitly disclose fees before advice is given
  2. Categorise advisers into those which offer 'restricted' or 'independent' advice - restricted advisers can only offer advice on certain products and/or certain product providers while independent advisers can offer guidance on all types of investment areas from all products across all firms in the market
  3. Require all advisers to obtain additional higher-level qualifications.

Speaking to the press, the FSA's head of savings and investments Linda Woodall said: "The changes will improve customer confidence - we want people to feel that they are getting a service from their financial adviser that is relevant to their circumstances and in their best interests."

"These changes are about making the cost of advice clearer, where else would you buy something without knowing in advance how much it costs?"

"Customers will now know how much advice is costing them, the service that they are receiving and be reassured that their adviser is qualified."

Autumn statement lacks bank funding details say business groups

06 December 2012 •

Business groups have welcomed measures contained in the Autumn Statement to support UK firms but want clearer details and timescales on the creation of a state backed Business Bank.

The Government revealed yesterday that it will co-invest £300 million alongside private investors over the next two years into a Business Bank, but said any further details would be set out late in December 2012.

Reactions to the announcement came after the Bank of England revealed that the Funding for Lending Scheme - another Government initiative designed to boost lending to small businesses - had been poorly taken up by banks and building societies.

While the Federation of Small Businesses welcomed the measures on capital allowances in the statement and the cancellation of the 3p rise in fuel duty originally planned for January, it was one of many business groups to urge the Government to act swiftly to ensure funding reaches growing companies and drives economic growth.

Elsewhere, the Forum of Private Business's chief executive Phil Orford described the statement as good news for small businesses in cutting day to day costs.

"The increase in the Annual Investment Allowance to £250,000 is welcome but a tacit admission that the decision to cut the same allowance to £25,000 this year was a wrong one.

"Nevertheless, we welcome this increase and urge businesses to take advantage of it. There are big savings to be had here for firms who've been waiting for the right time to invest and upgrade equipment, and this kind of spending tends to wash right down the supply chain."

With regards to personal finance, the Chartered Institute of Taxation (CIOT) said the Statement was a 'mixed bag' for pensioners.

The CIOT noted that whilst a small band of pensioners were set to gain from the increase in the basic state pension to £110.15 from April 2013, the phasing out of the age-related personal allowance was likely to hit those at the lower end of the income scale.

Robin Williamson, technical director of the Low Incomes Tax Reform Group, explained: "Although nobody will lose in cash terms, those approaching 65 now may have to revise their expectations and prepare to pay more tax than they might have anticipated. And more pensioners could be drawn into self-assessment as a higher proportion of those reaching 65 become, or remain, taxpayers than in previous years."

Universal Credit To Hit Small Businesses And Start-ups, MPs Warn

22 November 2012 •

Small businesses, the self-employed and start-up companies could all struggle with major upcoming changes to the welfare and benefit system and the way PAYE data is reported, a report by MPs has warned.

Under the new Real Time Information (RTI) system, most employers will need to report their employees' PAYE payments - such as tax and NICs - on or before each pay day, as opposed to at the end of each tax year. RTI will be crucial to the Government's new Universal Credit programme, which will calculate welfare claims and tax credits according to real time earnings.

According to the report published by the Work and Pensions Select Committee, the additional administration involved in RTI and Universal Credit could impose a 'significant and unnecessary burden on the self-employed', while ready access to the internet may cause problems for others.

The Committee also argue that the proposed minimum income rules for the Universal Credit could act as a disincentive to entrepreneurship.

Although a pilot of the Universal Credit system will begin in the north west of England in April 2013, MPs are calling for the 'ambitious' full national roll-out due in October 2013 to be delayed.

Commenting on the report, Anthony Thomas, chairman of the Low Incomes Tax Reform Group (LITRG) said there was a serious 'lack of realism about the extent of digital exclusion among the business community.'

"There are also far-reaching consequences for claimants and small businesses alike of erroneous data creeping into the systems, which could seriously impact their operation in practice."

According to the LITRG, the requirement of RTI to report employee earnings on or before the date of payment was unrealistic for many small businesses, particularly where employees are paid on an ad-hoc basis.

"Self-employed claimants will face substantially greater burdens to starting and growing their own business than now, which is worrying," he added.

"Those requiring some support from the welfare system to get a self-employment business going will need to prepare accounts for the DWP each month on a completely different basis from those it has to prepare for HMRC once a year. This will impose extra bureaucratic burdens and material additional time and financial cost, which are likely to deter claimants from starting up and building their own businesses. This is not the right way to go about encouraging new business start-ups."

Fuel duty and unfair petrol prices hitting economy, say motoring groups

16 November 2012 •

'Unfair' fuel taxes and wholesale petrol prices are hitting drivers and causing lasting damage to the UK economy, business and motoring groups have warned.

The report by the Institute of Economic Affairs (IEA) argues that 'destructive' fuel duty prices puts 'companies at a competitive disadvantage and acts as a disincentive to work.'

In separate report, the AA added to growing discontent towards petrol retailers, revealing that falling wholesale fuel prices have not been reflected by prices at the pump.

The concerns follow a week of Parliamentary debates into the planned 3p fuel duty increase in January. Although any official announcements will be made in next month's Autumn Statement, the Government hinted at a possible delay in the tax saying it was 'determined' to help struggling households.

Calling for the rise in fuel duty to be cancelled, the IEA's head of transport Richard Wellings said: "Fuel duty in the UK has risen to exorbitant levels. Motorists are being unfairly treated by the Treasury. It's time politicians realised that when they tax so heavily they damage the economy. This is especially true when it comes to a tax like this which puts British businesses at a competitive disadvantage."

"Cancelling the planned rise in fuel duty should be a priority in the autumn statement. But this is not enough. Delivering on economic growth means reducing transport taxes over the longer term and bringing in more private sector investment," he added.

Echoing the IEA, the Forum of Private Business (FPB) said that fuel duty should be frozen for the foreseeable future.

"A 3p rise in January would be nothing short of economic vandalism in the current climate, and conceivably be the worst possible start to the New Year for cash strapped small businesses," it said.

Meanwhile, the AA's president Edmund King called for transparency within the wholesale petrol market.

"Recent political focus has been on the 3.02p-a-litre fuel duty increase, scheduled for 1 January, either ignoring or unaware that duty's ugly sister, unrestrained wholesale prices, has been running rampant in the fuel market."

European wholesale petrol prices fell from around 54p a litre at the start of October to 45p at the end of the same month. The AA estimates that this should have reflected a 10p decrease in consumer prices, however, prices at the pump moved down less than 4p a litre.

SMEs face rising business costs

26 October 2012 •

The majority of small businesses in the UK (95 per cent) have seen a rise in business costs over the past year, according to research from the Forum of Private Business (FPB).

According to its latest quarterly referendum survey, transport costs were the most commonly cited increase (88 per cent), followed by energy costs (85 per cent), marketing costs (82 per cent) and the cost of raw materials and stock (73 per cent).

Despite this month's fall in inflation to lowest level in nearly three years, the FPB said that many businesses were 'still facing an uphill battle to make ends meet.'

A rise in VAT and energy prices, combined with the weakness of sterling for importers, was blamed for the overall increase.

The Forum's senior policy adviser Alex Jackman warned that respite from energy price hikes in the near future was unlikely, with oil prices, utility bills and fuel prices all predicted to rise.

"It could be that we are shaping up for another winter of discontent, particularly if the mercury plunges this winter and firms are hit with huge heating bills and a fall in trade like we saw three years ago," he said.

"Many firms are already battling the economic elements, but if the weather turns it could spell the end for those already walking a cost tightrope."

Although CPI inflation has now dropped to 2.2 per cent, research suggests that small business inflation sits at 6.7 per cent, rising fastest for micro businesses and SMEs than the rest of the UK society. The figure has however improved slightly from the 8.3 per cent reported by the Forum last year.

Worryingly, one in three businesses also admitted they were absorbing rising costs or cutting their own costs in order keep customer prices static.

Businesses said that late payment from customers and competition from other businesses offering products below cost price were exacerbating the tight conditions.

The FPB is now calling for the Government to consider freezing business rate rises due in April next year.

Entrepreneur scheme extended to boost enterprise

18 October 2012 •

The New Enterprise Allowance (NEA) scheme has been extended to give 33,000 extra jobseekers help to set up their own business.

Initially launched in 2010, the NEA is available to Jobseekers Allowance (JSA) claimants aged 18 and over. A weekly allowance worth £1,274 over 26 weeks at £65 a week is paid to successful applicants to help them set up an enterprise.

Claimants can also access a loan of up to £1,000 to help with start-up costs as well as expert coaching from a business mentor. Since launch, the scheme has helped to set up 8,180 businesses, and it expects 40,000 to be created by the time the scheme closes to new referrals in December 2013.

Commenting on the extension, Prime Minister David Cameron said: "If Britain is to compete on a global stage, we must do all we can to support budding entrepreneurs and build a nation where everyone aspires to great things.

"I am determined to get behind people who have ideas that will work and a can-do attitude that will turn those ideas into successful enterprises.

"It doesn't matter what your background is or whether you are out of work, if you are prepared to work hard and aspire to achieve more, this Government, through schemes like the Enterprise Allowance, will back you."

The scheme used to require that applicants had been claiming JSA for at least 26 weeks before accessing the finance and support, but it has now been amended to allow access from day one of JSA.

Two in five Brits do not know where their pension is invested - do you?

26 September 2012 •

More than two in five adults (41 per cent) do not know where their pension fund is invested, according to research from Baring Asset Management.

It said the large number - equivalent to eight million people in the UK - highlights a passive attitude towards saving for retirement and warned that people should adopt a more active approach through regular pension planning.

The survey also found that the number of adults who have never reviewed their pension plans is worryingly high - around 45 per cent or 16 million non-retired Brits.

"In spite of the on-going global financial crisis people are refusing to consider the impact it may be having on their long term savings," it said in a press release.

Personal or company pensions are most commonly paid via monthly or lump sum contributions to a pension provider, who will then invest it on the individual's behalf into a selection of investment funds; usually in fixed-interest bonds, property and shares.

However, it seems many are unaware that the choice of where to invest a pension fund often lies with the individual and will largely depend on their attitude towards risk and their investment objectives.

The same survey conducted in 2008, prior to the financial crisis, revealed that attitudes towards financial planning in 2012 have not improved, and in some cases worsened.

Elsewhere, a further 12 per cent could not remember when they last reviewed their pension, while under half had failed to review their pension plans in the last 12 months.

Marino Valensise, chief investment officer at Barings said that people were not taking the necessary action to ensure their pension provides what they will require in retirement.

"It is concerning to think that despite the very high profile global financial crisis that we are experiencing not more people have considered and acted upon the need to address how it may be affecting their funding in retirement."

"A large proportion is happy to accept the default setting which may not necessarily offer the best fit in terms of risk and reward. People who fail to take an interest in understanding the type of pension they have or indeed where it is invested are burying their heads in the sand."

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