PracticeConsultingPERSONAL FINANCE – My financial Xmas wish list.

PERSONAL FINANCE - My financial Xmas wish list.

There's no better time than Christmas to wish for changes to be made to bugbears like annuities, ISAs, regulation and cash machine charges.

Dear Santa[QQ] Christmas is supposed to be a time when wishes can come true. Children scribble lists of presents they really want and send them up the chimney. Grown-ups blow the diet and gorge on goodies they know aren’t good for them. It would be nice to think a little of the Christmas magic can rub off on the personal finance industry too. So I have jotted down my own list of Christmas wishes for the financial world. A copy has been ceremonially posted up my dining room chimney en-route to you in Lapland. But in case that gets lost along the way, I know you are an Accountancy Age reader so I thought it prudent to list them here too. Please don’t think I’m greedy when you read the list. You see, I am asking not only for me, but for all consumers of financial services in the UK. I know you are very busy this time of year so don’t feel you have to tackle everything by Christmas. Just putting change in motion so we see the results over the next year would be present enough. Annuities. Consumers are getting into a real lather over being compelled to buy annuities with their pension fund. Improvements in life expectancy and changes in long term interest rates have bought annuity rates tumbling down and, rightly or wrongly, customers now feel annuities are a bad deal. The government has been muttering about reform for over a year now, but nothing has changed. I know there is no magic solution, but it would be great if you could persuade the government to make up its mind on some new rules. Maybe the age by which people are compelled to annuitise could be extended from 75 to 80, giving them a few more years of choice. And it would be great if the investment rules for annuities were relaxed, so providers could buy corporate bonds as well as gilts, thus boosting rates. Individual Savings Accounts, ISAs, are another bugbear. Although less than a year old, nobody seems to like them. The overall level of savings has gone down. Fund managers and banks accuse each other of misleading consumers into putting their money in them. Consumers and, worryingly, many independent financial advisers don’t understand the rules. What can you do? It would help everyone if you can persuade the Treasury to simplify the rules a little. By all means let’s keep a strict annual subscription limit of £5,000, but how about scrapping the distinction between maxi and mini ISAs. In other words, you put your ISA money into either cash, shares or insurance and switch it around between the three as much as you like over the years. Regulation. On the subject of the Treasury, I suppose we have to mention regulation. Our current system of regulating the sale, rather than regulating the product, does not seem to be working. Many of the problems over pension mis-selling, alleged endowment mis-selling and the like happened after the Financial Services Act of 1986. I know we are getting a new one, but more of the same isn’t necessarily the answer. Slick sellers can always stretch the rules. Can you have a word in the regulator’s ear about shifting the emphasis a bit. How about more regulation on product design and less on the processes of sales and marketing? We are seeing a move to this with stakeholder pensions and CAT-mark ISAs. I know some fear over-strict product controls might dent consumer choice, but if it stops you having the choice of a rip-off product, then a reduced choice is OK by me. While you are at it, please tell the Treasury to hurry up with bringing mortgages and private medical insurance into the regulatory fold. Westminster spin doctors are circulating a few nasty rumours about potential tax changes. In particular, we hear the government is keen to damp down the excesses of the housing market. Some rumours talk of further hikes in stamp duty, while others suggest that residential property may lose its capital gains tax exemption. Such change may be well intentioned, but it isn’t necessarily welcome. Many older people use their home as a pillar of their retirement planning. Whacking a 40% charge on the gains made when they trade down to a smaller home is hardly helpful, not least when annuity rates are under pressure. My last wish is to do with cash machines. You may have read that the banking industry is split on whether it should charge you for taking your own money out of the bank. Some say not, including Royal Bank of Scotland, Co-op Bank and Nationwide building society. Others, led by Barclays, want to charge all those who are not their customers whenever they use a hole-in-the-wall machine. But even financial experts cannot always remember which machine they can use for free. Can you please knock some heads together on this one? No charging would be best, but if this is not possible, then at least let’s have a system where you see the fee on screen before taking money out and have a chance to stop the transaction and go elsewhere. I know this is a lot to ask; but like anyone writing a Christmas list I’ll be very happy if half the wishes I ask for are granted. ?:

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