Apricity’s Cathi Harrison considers how elements of financial services could be made simpler and easier to work with, both for industry participants and clients.
Having read an article by Andy Bell at AJ Bell about how the six different ISAs (I was actually surprised to discover there’s now six!) could be simplified into a single ISA structure (a great idea by the way, with a commercial awareness also clearly shown), I thought I’d review what else in financial services could be made a bit easier…
Pensions
Aside from the obvious fact that they have already been “simplified” (although I appreciate anyone who has joined financial services since 2006 might find this hard to believe) there is clearly a huge opportunity to further simplify them:
- Auto-enrolment rules could better match personal pension scheme rules (if employers can understand them better, employees might be more likely to use them).
- Scrap the lifetime allowance – it’s unnecessary if there’s an annual allowance which naturally caps contributions (added bonus of removing additional LTA protection issues).
- Consolidate ‘capped’ and ‘flexi access’ and ‘UFPLS’ and every other option into a single ‘pension withdrawal’ structure.
- Make all pensions have a pension withdrawal structure – no need to move.
- Oh, and… stop changing the rules every 5 minutes!
Cost disclosure
- Scrap KIDs (they’re useless) and fund factsheets (same) with their simultaneously generic and contradictory information.
- Have a personal illustration with precise (ex ante) costs for every piece of advice. Plan charge. Fund charge. Adviser charge.
- Get rid of categorisations of ’transaction’ costs, ‘research’ costs, ’trading’ costs etc. Remove the definitions of AMC, OCF, FMF. Forget about clean, super clean, dirty and filthy. Just have one, single, fund cost (investors don’t care how that is spent – they just want to know how much is coming out of their fund).
Inheritance tax
- Get rid of it. There is enough tax in life. There shouldn’t be a tax on death.
Regulation
I’m bound to think this can be simplified, but when I first started Apricity and was speaking to other compliance consultants, it was like learning yet another new language. When I drilled down to what all this terminology meant, it wasn’t actually that tricky. It was just lost in an unnecessary layer (or two) of complexity.
I can’t do much about the first three… but I’ll keep doing what I can on the last one!
