Govt more than £600m behind tax avoidance targets

Government measures to clamp down on tax avoidance are bringing in £615m less than originally forecast, according to an analysis from the Office for Budget Responsibility.

In an investigation of successive measures to clampdown on avoidance introduced since 2010, the OBR found that none of the plans had brought in more than expected, with many falling below targets.

Reviewing 39 announced changes introduced by the Conservatives since they first entered power in 2010, the OBR said: “Most measures are within £50 million of the original estimate either way, but that there have been five measures where the average yield is lower by more than £50 million a year.

“No measures have significantly outperformed the original costing.”

18 of the 39 measures were found to be yielding less than expected, producing a total shortfall of £834m, while 10 were exceeding forecasts by £219m, resulting in an annual overall shortfall of £615m.

In particular, the OBR found that plans to raise revenues through new disclosure facilities for Crown dependencies in Jersey, Guernsey and the Isle of Man would now raise around 20 per cent less than expected, equivalent to £50m a year.

Similarly, while a 2010 plan to reduce fraud and error in tax credits was expected to raise £350m, the OBR said it was instead generating savings of £200m.

And a crackdown on onshore employment intermediaries has also yielded £300m less than expected in the last two years, although the OBR adds this is expected to improve from 2016/17.

In his most recent Budget, the Chancellor promised to devote money raised from efficiencies at HMRC to further avoidance measures.

The analysis comes months after the Institute for Fiscal Studies accused the Conservatives, Labour and Lib Dem parties of using “made up assumptions” for increased revenue from avoidance clampdowns as part of their election campaigns.

A Treasury spokesman could not be reached for comment.

The biggest FCA fines of 2015

The FCA imposed a total of £905,219,078 in fines in 2014 against 39 firms. The level of penalties marks a 38 per cent fall on the £1.4bn issued in fines in 2014.

Banks continued to pay the price for foreign exchange failings, as well as manipulating Libor rates.

Issues around complaint handling related to missold payment protection insurance also saw record fines.

But it was not just the banks that got hit, with major fund groups also paying the price for regulatory failings.

Here is our breakdown of the biggest FCA enforcement cases this year.

10. Ex-hedge fund chief executive Alberto Micalizzi – £2.7m

Former hedge fund Dynamic Decisions Capital Management chief executive Alberto Micalizzi is the only individual to have a multi-million pound fine issued against him this year.

He was banned and fined in July after appealing the decision against him.

The Dynamic Decisions fund was marketed as having a low risk, highly liquid strategy. But in the last few months of 2008 during the financial crisis the fund suffered massive losses amounting to approximately 85 per cent of its value.

Micalizzi sought to conceal these losses from investors by deliberately misrepresenting the fund’s value.

9. Threadneedle – £6m

Threadneedle Asset Management was fined over £6m earlier this month over failing to put in place adequate controls in its fixed income business.

The failings allowed a fund manger on the emerging markets debt desk to initiate, execute and book a $150m trade which, had it settled, could have caused a $110m loss to the relevant client funds.

Threadneedle also failed to provide accurate information to the regulator and failed to correct this for four months.

8. Merrill Lynch International – £13.3m

In April the FCA imposed its highest fine for transaction reporting failures on Merrill Lynch International.

The firm incorrectly reported over 35 million transactions, and failed to report a further 121,387 transactions for seven years.

Merril Lynch was privately warned about its misconduct in 2002, and fined £150,000 in 2006.

7. Aviva Investors – £17.6m

Aviva Investors Global Services was fined £17.6m in February for failing to manage conflicts of interest.

A total of £132m has been paid in compensation to eight affected funds to ensure none of the funds were adversely impacted.

The regulator found that Aviva Investors operated systems which were open to abuse and allowed traders to “cherry pick” funds which paid higher performance fees.

6. Clydesdale Bank – £20.7m

Clydesdale Bank was hit with a £20.7m fine in April over the way it handled payment protection insurance complaints.

The failings date back to mid-2011 when the bank’s policies meant that complaint handlers did not search for documents in relation to mortgages and loans repaid more than seven years prior to the complaint.

But in some cases relevant documents were available.

Between May 2012 and June 2013, Clydesdale also provided false information to the Financial Ombudsman Service in response to requests for evidence of the bank’s PPI records.

5. Barclays – £72m

In November the FCA issued its largest ever fine for financial crime failings against Barclays.

The bank agreed a £1.9bn transaction for ultra high-net-worth clients in 2011 and 2012.

The transaction was dubbed the “elephant deal” internally, and netted the bank £52.3m.

4. Lloyds Banking Group – £117m

The regulator imposed its largest ever retail penalty in June after Lloyds failed to properly handle PPI complaints.

The bank’s staff were told to assume its sales processes were compliant and robust, which led to complaint handlers unfairly rejecting cases or failing to fully investigate them.

As a result Lloyds reviewed or chose automatically to uphold around 1.2 million PPI complaints, and set aside £710m for redress.

3. BNY Mellon – £126m

Bank of New York Mellon was fined £126m in April for failing to comply with client money rules.

Firms are required to keep records of client accounts and state which division the client monies relate to. Instead BNY Mellon used global platforms to manage custody of assets.

Following the Lehman Brothers collapse in 2008, the FSA required chief executives to confirm they complied with the client money rules.

2. Deutsche Bank – £227m

The FCA fined Deutsche Bank in April for manipulating Libor and Euribor. Combined with fines imposed by US regulators, the total penalties against Deutsche Bnk were £1.7bn.

The FCA revealed a number of incriminating messages between traders, including one request to a Libor submitter which said a low fix “would be the best xmas present”.

1. Barclays – £284m

The second appearance for Barclays, the bank was fined £284.4m after traders used chat room to manipulate foreign exchange rates.

The penalty was the largest every imposed by either the FCA or FSA.

After reaching settlements with US regulators, the bank paid a total of £1.5bn in fines.

Certain groups of traders described themselves as “the players”, “the 3 musketeers”, and said “we all die together”.

MAS slashes marketing budget; unveils plans for ‘assisted digital’ guidance service

The Money Advice Service plans to slash its marketing budget for next year by more than 50 per cent as it sets out its response to the Farnish Review.

The MAS has today published a consultation on its business plan for 2016/17. The plan outlines proposals to cuts its total budget by £6m, from £81.1m to £75.1m.

The ‘money guidance’ budget will be reduced by £4m, from £34.1m to £30.1m, while the debt advice budget will fall by £2m, from £47m to £45m.

The biggest spending reduction comes through marketing, which will be slashed by 55 per cent from £8.8m to £4m. It will be the second year in a row the marketing spend has been drastically reduced.

The MAS has also confirmed it has ceased “all dedicated brand building marketing”.

“Instead, customer communications will seek to co-ordinate partners,” the MAS says.

“This co-ordination will address social norms about spending and saving; and topical money issues that can engage consumers with their money.

“We will particularly focus piloting, testing and learning on segments that are disengaged from managing their money.”

One idea the MAS has piloted is an “assisted digital” service that combines website information with telephone support, without straying into regulated advice.

The MAS says: “After customers have read complex information on financial guidance websites about products, some of those customers may still need support that reduces confusion and helps them to take action.

“Thanks to the interest and involvement of moneysavingexpert.com, we ran a pilot for six weeks of just such a service. An invitation to call a dedicated Money Advice Service helpline was embedded at key points in moneysavingexpert.com pages dedicated to helping consumers choose basic bank accounts, cash Isas, savings accounts and credit card
balance transfers.

“The pilot showed that there was a low but focused demand, and that we could meet the customer need without straying into regulated advice.

“We are reviewing the pilot results in the light of our budget for next year. But we think an operational version of this service, offered to financial guidance websites that aim to educate and inform consumers about product choice, could be a promising way of bringing the support offered by a helpline to customers that need it.”

In addition, the MAS has embedded a new strategic objective – ‘Improving access to guidance and advice’ – in its business plan.

The pledge means that over the next three years the MAS will work to “enable more people to access the right information, advice or guidance when making financial decisions”.

The Treasury is currently consulting on how public financial guidance should be structured and funded. The consultation is running alongside the Financial Advice Market review.

In its response, published yesterday, Apfa called for the Money Advice Service, The Pensions Advisory Service and Pension Wise to be merged.

CML elects new chairman

The Council of Mortgage Lenders has appointed Leeds Building Society chief executive Peter Hill as chairman for 2016.

Hill succeeds Royal Bank of Scotland’s Moray McDonald, who held the role at the trade body during 2015.

Hill says: “We are set for another big year in the mortgage industry. The Mortgage Credit Directive takes effect from the end of March; the Financial Conduct Authority is embarking on an examination of competition in the mortgage market; significant tax and likely regulatory changes are being introduced in the buy-to-let sector.

“And we are determined to keep up momentum on our collaborative approaches to improve retirement lending and mortgage cost transparency; these have great potential to benefit both consumers and lenders.

“Against this busy backdrop, we are also working through the ramifications of a potential merger with other trade bodies, as proposed by the Financial Trade Associations Review. This is a significant decision for the CML, on which our members will vote in the first quarter of 2016.

“As incoming chairman, my dual aims for the year are to ensure that any organisational change does not detract or distract from our normal focus on services and representation in the short term, and that any change is for the benefit of all CML members in the long term.

“I am grateful to Moray McDonald for steering the CML through this landscape so far, being mindful of the needs of members of all sizes, types and different business interests.”

Govt casts its shadow over the FCA

2015 was the year the Government cast a looming shadow over the FCA, from dictating the regulator’s workload to ousting its senior management.

The controlling hand of Government in regulatory affairs was made abundantly clear in July when it was announced that FCA chief executive Martin Wheatley would be stepping down. A statement from Chancellor George Osborne thanked Wheatley for his tenure but added: “The Government believes different leadership is required to build on those foundations and take the organisation to the next stage of its development.”

Independent regulatory consultant Richard Hobbs says: “The Government has fallen very much out of love with its regulator, and as a result there are going to be significant changes. It seems like the banking lobby is finally being listened to.”

The Government also set the tone on the FCA’s priorities. Following the rollout of pension freedoms in April, the FCA was charged with putting in place a framework to govern Osborne’s flagship reforms.

In July, Money Marketing revealed the types of pension freedoms complaints consumers were bringing to the Financial Ombudsman Service. Complaints mainly centred around the way providers were allowing consumers to access pension freedoms, poor service and delays and frustrations over the requirement to take advice for safeguarded benefits worth more than £30,000.

But the dominant issue has been insistent clients. Advisers have been concerned about future liabilities should they process a transfer despite advice not to do so, and the FCA was forced to issue guidance on dealing with insistent clients in June.

But law firm DWF partner Harriet Quiney is not convinced the insistent clients challenge has been resolved.

She says: “There is more clarity than there was but a lot of people are still concerned about what to do if an insistent client approaches them. A lot of networks have taken the view they will not advise insistent clients because it’s just too risky. They don’t feel confident that if they give appropriate advice, but ultimately do what the client wants, that they will be protected in the long run.”

The disquiet over insistent clients and pension transfers has also extended beyond the advice market to Sipp providers. In May, Money Marketing reported how Sipp providers were coming under increasing pressure to intervene on pension transfer advice, and block transfers out of defined benefit schemes that are not in clients’ best interests. The contested case of Berkeley Burke, in which the Financial Ombudsman Service found the provider had failed to carry out adequate due diligence on an unregulated collective investment scheme, continues to be reviewed by the FOS.

Quiney says: “There is a big concern around how the FOS seems to be forcing obligations on Sipp providers. For a Sipp provider to be told they should have told a client an investment was unsuitable is frankly ridiculous.”

EY senior adviser Malcolm Kerr says: “2015 revealed a major challenge for the regulator: ‘how do you regulate the unregulated?’ For example, Sipps, where the data is around the wrapper not the unregulated product. Or pension freedom scams. Or, dare I say it, leveraged film finance investments.

“Add these issues to the concerns raised by the wealth management thematic review, and many other ongoing inquiries, and 2016 will see lights burning in the windows late at night at the FCA.”

Expert view: Richard Hobbs

Despite the fact there has not been a change of Prime Minister or Chancellor, we have had a change of Government at the general election. It became clear it was the Lib Dems who were driving a lot of financial services public policy, such as banker bashing, and it’s people like Vince Cable who were keeping Martin Wheatley in a job.

Our politicians play a rather sophisticated game. They create arm’s length regulators so they do not get the blame when things go wrong. But when things do go wrong and they think the regulator is at fault, they quickly start to influence the agenda. If you do not dance to the Government’s tune, as happened with Wheatley, then you will quickly find yourself dumped.

The mood music has changed, both at a UK and European level, and now the conversation is not about more regulation, it’s about potentially having too much.

Whether there is significant deregulation or not remains to be seen, but it looks like the high tide mark for regulation has been passed.

Richard Hobbs is an independent regulatory consultant

Robert Reid: Large firms should not receive special FCA treatment

The news that consolidators are under the microscope is long overdue. The number of times I have been told of an acquisition triggering a mass transfer of assets where ongoing charges increase with no corresponding increase in services is far too common to be apocryphal.

Just how this works as suitable advice I have no idea.

But should it surprise us when we operate in a market that has been remuneration focused for so long? People talk glibly about being client focused but few really practice it given their wish to avoid any discussion over fees or costs versus services delivered.

Then there is the issue of moving assets from one platform to another when you take over a client whose previous advice included investments.

If the money is moving Sipp to Sipp or Isa to Isa it is of no issue but where it is a general investment account or an investment bond then its movement will be restricted by the taxation due on its liquidation.

I would be shocked if those using these “locked in” portfolios have ever explained their taxation-led illiquidity when confirming them as suitable. In my opinion, there is little difference between locking people in and taking less than transparent or obvious charges. Both are as far away from treating customers fairly as you can get.

So the FCA needs to act and make sure that size does not mean special treatment. Just because a corporate business model needs cash flow from inaction to survive does not mean it is right for them to act like Vikings pillaging with no fear of being exposed or called to account.

When he was FCA chief executive Martin Wheatley stated he favoured fixed fees over those linked to value and contingent on sale of product. I do think he is partly right: we need to be paid for what we do but we also need some element of risk premium. A mix, not a swap, is where I sit in this discussion about change.

The last generation thought the banks could do no wrong. Regrettably, the banks were not interested in looking after them until they had safeguarded their profits, as their focus had never ever been on client outcomes.

In order to make this step change, the general public needs to understand that they need advice. They also need to realise that, while robo-advice may reduce costs, it sure as hell will not hold their hand when the market drops. We need to engage them then educate them if we are truly to move to a client-centric market. Indeed, there is little point in changing the market if we do not take the public with us.

In closing, next year sees me having completed 15 years as a columnist with Money Marketing. In my first column of 2016 I intend to look back to the start to see what, if anything, has changed.

May I wish us all a lighter regulated year to come – if not from rules, at least from demands for fees and so on. Best wishes to you and yours for the festive season.

Robert Reid is director at The Ideas Lab

Ascentric delays £4m tech upgrade

Ascentric is delaying the launch of its £3.9m technology upgrade until next year to conduct more tests on the software.

The technology, called Project Accelerator and provided by Bravura, was originally due to be launched in September 2015, then in October 2014 the date of the launch was postponed to the end of 2015.

Ascentric, which is owned by Royal London, will delay the launch to test the software “properly” before advisers access it, says a Royal London spokesperson.

However, the firm has not set a deadline for the launch of Accelerator.

Ascentric chief executive Jon Taylor says: “We have delayed Accelerator into next year to ensure we carry out a robust testing programme before going live.

“We are keen to ensure we deliver the best quality platform for our customers with the high standard of service they expect.”

Ascentric is the 11th-largest platform in the UK by assets under administration, with £9.6bn as at 30 June.

Nucleus reports 26% surge in Q3 operating profit

Nucleus has seen its operating profits climb from £1.9m to £2.4m for the third quarter of 2015.

The improvement represents an increase of 26 per cent, although including a £1.2m one-off credit operating profits rose by almost 90 per cent to £3.6m

Gross inflows for the quarter reached £1.54bn, up by four per cent on a year-on-year basis from £1.48bn.

Assets under administrations increased 16 per cent to £8.7bn, up from £7.5bn, while turnover increased 30 per cent from £17.2m to £22.3m.

Nucleus chief executive David Ferguson says: “Our latest set of financial results shows continued forward and steady momentum and we are on track to end 2015 in a better than ever financial position.

“This is particularly pleasing given the last year or so has seen us transition our underlying technology; materially strengthen our senior team and agree a new back office administration contract.”

Government halves pensioner bond payouts

Returns for “pensioner bonds” issued by the Government are set to plummet by almost half.

The bonds were issued by the Government in two tranches from January this year, with the first set to mature next month.

However, because the products were a special issue, while savers were offered an interest rate of 2.8 per cent on investment earlier this year, those who roll over their savings into a standard guaranteed growth bond next month will now get just 1.45 per cent.

The bonds were introduced by Chancellor George Osborne as part of the 2014 Budget in a bid to encourage saving among over-65s.

As well as the one-year bonds which will begin to mature next month, investors were also offered a three-year bond, which pays 4 per cent interest to January 2018.

An NS&I spokesman says: “65+ Bonds were a special Issue designed to support older savers over a 1-year or 3-year investment term. As with all our standard products, the interest rates on NS&Is Guaranteed Growth Bonds are set to balance the interests of savers, taxpayers and the wider market whilst offering a 100 per cent guarantee.”

Aegon revamps default pension funds

Aegon has launched a new range of default funds for its workplace pension schemes in response to the pension freedoms.

The five funds have platforms charges of between 0.05 per cent and 0.4 per cent.

They all use Aegon’s “flexible target glidepath” which targets three retirement income decisions in the final six years of saving.

The flexible strategy is for people planning to go into drawdown, annuity for savers who want a guaranteed income and a cash target is aimed at schemes with very small pots.

At retirement the flexible strategy leaves around 26 per cent in equities, 49 per cent in fixed interest and 25 per cent cash.

All Aegon’s existing workplace funds – which targeted annuities through lifestyle strategies – remain available.

Aegon investment director Nick Dixon says: “Auto-enrolment means that 80 per cent of workers now view their workplace pension as their main method of saving. As around 72 per cent stay in their scheme’s default fund, we must offer high-quality investments for those who don’t make active investment decisions.

“Within five years advisers estimate only 25 per cent of people will look to purchase an annuity at retirement. The dramatic shift in investor behaviour means traditional lifestyle funds which target an annuity by moving into long gilts no longer serve ‘typical’ workplace investors.

“Risk reduction using a diversified investment strategy tends to offer better returns for less risk, especially where investors delay or phase into retirement, and where they choose drawdown.”

Nick Bamford: The importance of common sense

“When a client engages you to do their financial plan they pretty much expect it to be delivered there and then.” These were the words of a consultant we saw recently to help us review the systems and processes we use to deliver financial plans to clients.

The advice was very apt as we were staggered to learn our six-step financial planning method contained 164 process steps. We were also shocked to identify the fact the process can take up to 25 weeks to complete. Any client expecting immediate delivery is going to be very disappointed.

Of course, a lot of that 25-week timescale is taken up by waiting: waiting for the client to respond or for product providers to deliver information we have requested. But while some of what we need to do involves managing client expectations, we also need to look inwards and ask ourselves how we can improve.

The exercise of analysing “how we do things round here” enabled us to begin to answer two important questions: how do we do it quicker? And how do we do it better?

I spoke about this at the Personal Finance Society financial planning symposiums in November and found many other planners were having the same experience. Just about everyone agreed we all want to deliver the very best advice in a profitable manner. System and process design is an integral part of ensuring a really good client experience and, at the same time, delivering that profitably.

The exercise enabled us to change the way we did things in order to cut out some of the delay. For example, issuing letters of authority at the same time as we send the engagement letter to the client, rather than waiting for engagement letters to come back before sending authority letters. Also, getting the administration team to ask our paraplanner to sense-check the quality of data received back from the product providers as each piece comes in, rather than storing it all up. These two simple process step changes shaved a valuable 10 per cent off of the 25-week timescale.

A lot of what we learned can be safely placed under the label “common sense” but it is amazing how much attention-based blindness there can be in a firm. We spend so much time being so focused on doing the job in hand we do not step back and spot the important stuff that can be improved for the benefit of both the client and the firm.

Common sense or not, the worst you can hear from any member of a team is, “This is the way we have always done it.” Constant improvement of processes is just one of the ways we can achieve the client-centric aim of the very best financial planning and the firm-centric aim of being more profitable.

Nick Bamford is executive director at Informed Choice

Smarter Business Innovators: Lift-Financial’s Joel Adams

For Lift-Financial joint founder and chief executive Joel Adams the workplace is the perfect hunting ground for new clients. The firm, born out of a management buyout from Chartwell in 2007, now has more than 50 staff, many of whom are engaged in delivering advice and services to the members of the corporate pension schemes it oversees.

And while the private client focus will always be on the top earners, employees of all types are becoming personal clients of the firm.

What are the benefits of finding new clients in this way?

The workplace is a fantastic way to build up your private client bank. We have found it is far easier to get one client who employs 100 people who could all become private clients than go and target 100 potential private clients directly.

Coming in through the workplace also gives the employee a sense that we have the tacit endorsement of the employer. It suggests they have done some due diligence in selecting us. Many employees in City firms understand more about financial services than a lot of financial advisers, so you have to demonstrate the highest professional standards. Being a chartered firm with chartered advisers has proved invaluable for us.

What are the key areas of engagement? Is it all about auto-enrolment?

The pension scheme has been the lead conversation in recent years but nowadays we are leading on financial education. Saying that, the biggest draw recently has been seminars around the annual tapering allowance. Out of 60 people who have registered for our latest annual tapering allowance session, 33 have requested a one-to-one conversation as well.

We also have sessions for younger members of staff where we look at repaying student debt and saving for a house. Whether the conversation is about mortgages or pensions, we create the opportunities through financial education sessions.

As dynamics such as smarter technology, robo-advice and the potential for advice-lite from the Financial Advice Market Review play out, how do you think the firm will have to adapt to remain relevant?

The Financial Advice Market Review is looking at simplified advice and we think it has a place. It is a market we are very interested in. We could use this to scale up our operations to see more people.

Regarding technology, we have invested in a bespoke system through Intelliflo, going live in January, which will help us get closer to clients receiving full advice. If the time comes when the world is dominated by robo-advisers, we will be so close to our clients that they will not want to move.

The new system means we will be able to operate more efficiently and more cheaply. It will mean we will have a full transaction history and we will be able to give time and money-weighted returns. At the moment, we cannot give a clear picture of the overall return we have given the client, but in future we will be able to demonstrate the value we have delivered.

What do you think the future holds for adviser charging?

We believe one day all firms should have to operate in a way that is fully aligned with the client. Adviser charging requires the adviser to sell something to get paid, even if not buying something is the best thing to do. Having to make a product sale means you cannot be 100 per cent independent.

Govt pushes ahead with plans to name and shame serial tax avoiders

The Government has decided to roll out plans to name and shame serial users of tax avoidance schemes despite concerns the power is unfair and disproportionate.

In a consultation paper published in July, the Government set out a raft of proposals aimed at tackling those who “persist in engaging in tax avoidance”.

One of the measures suggested was to publish the names of the most persistent users of tax avoidance schemes where HM Revenue & Customs has challenged the use of the scheme and won.

The Government said serial avoiders would be defined as those who had entered into three or more tax avoidance schemes during a five-year “warning period”, which are later defeated by HMRC.

In a response document published today, the Government says “only a minority of respondents believed that public naming of the most persistent users of tax avoidance schemes that HMRC defeats would be a fair and effective deterrent.”

Respondents raised concerns that naming those who used tax avoidance schemes suggested they had carried out illicit behaviour, even if they believed they had acted within the law.

Others suggested there should be some form of tribunal approval before names are published, or that there should be a right of appeal against a decision to name and shame.

But the Government has rejected both these submissions.

In the response paper, the Government says: “The Government notes these views. It believes the potential naming of serial avoiders will be a useful tool to counter serial avoidance.

“The Government believes neither a right of appeal against a decision to name nor a requirement for a tribunal to approve naming would be appropriate.

“However, HMRC should advise any taxpayer if they are considering publishing that person’s details and give a suitable time for the taxpayer to make any representations as to why their details should not be published. Once a person’s details are published by HMRC, they will be removed from publication after 12 months.”

Eurozone GDP grows 0.3% in Q3

The eurozone economy expanded by 0.3 per cent in the third quarter of this year compared with the previous quarter, according to the latest estimates by Eurostat.

However, GDP growth for the wider European economy was higher at 0.4 per cent for the same period.

Compared with the same quarter of the previous year, eurozone GDP rose by 1.6 per cent and by 1.9 per cent in the 28-member economy.

Rising inventories and higher household spending were the main drivers behind eurozone economic growth in the third quarter, despite negative trading.

During the third quarter of 2015, household consumption expenditure rose by 0.4 per cent in the euro area, says Eurostat, and by 0.5 per cent in the wider Europe region, compared to 0.3 per cent and 0.4 per cent respectively in the previous quarter.

Inventories also rose 0.2 per cent for the same period in the eurozone, compared to a 0.2 per cent fall in the second quarter.

In the eurozone, exports declined from 1.6 per cent last quarter to 0.2 per cent in the third quarter this year, while imports increased by 0.9 per cent in the euro area and by 1.4 per cent in the 28 member states compared with 0.9 per cent and 0.3 per cent respectively in the second quarter of this year.

Artemis’ Cormac Weldon: Earnings will start growing in the US next year

The head of Artemis’ US team explains why he is holding cyclical stocks (like semi-conductors) while also investing in growth (videogame producers, Amazon).

From postroom to boardroom: B&CE chief Patrick Heath-Lay on making auto-enrolment pay

“If you walk down any high street in the country, just about every third retailer is saving with us,” says Patrick Heath-Lay. It is almost as though the B&CE chief executive does not quite believe his firm, which runs automatic enrolment scheme The People’s Pension, is responsible for one in three of everyone enrolled so far.

If he is still coming to terms with the growth of the provider, he can be forgiven. Before auto enrolment was launched in October 2012 the firm was focused on providing pensions solely for the construction industry. But Heath-Lay and chief operating officer Jamie Fiveash persuaded the board it should seize the opportunity and offer a master-trust on the open market.

Three years later nearly two million members are saving into The People’s Pension and the not-for-profit firm can boast household names including Pret a Manger, JD Sports and the Hilton hotel group as customers.

He says: “Originally we thought we’d just do auto-enrolment for the construction industry but two things changed that.

“Firstly, the big construction employers aren’t just about people in hard hats anymore: they are diverse and they have cleaners, recycling divisions and lots of other types of employee.

“You can’t go in there with a scheme just for construction workers, so we had to go beyond the traditional market.

“Secondly, the launch of Nest was a big threat. It was going around trying to get big employers and was not going to stop at the walls of the construction industry.”

As the biggest master-trust after Nest, the scheme has been thrust to the centre of a huge period of change for the industry. Lobbying with the likes of the Treasury and the Department for Work and Pensions is a world away from Heath-Lay’s first role at the provider.

He joined straight out of school in 1985 after his mother, who was working at a Jobcentre, found a job for him in B&CE’s mailroom. From there he gradually worked his way up, and was made chief executive in 2012.

While the firm’s growth has exceeded expectations, the tough economics of providing auto enrolment to millions of tiny pots forced the scheme to add an employer charge from 2016.

Employers will make a one-off payment of £500 plus VAT when they sign up, which the provider says will help pay for the extra support small employers need to comply with auto-enrolment. If working through an adviser the charge drops to £300 plus VAT.

“Just because we’re not for profit doesn’t mean we’re for loss,” says Heath-Lay.

“We need to make sure the way we handle this part of the market is proportionate for smaller employers and doesn’t detract from our existing 1.7m members already in the scheme.

“We don’t believe in front-loading charges on members to pay for that assistance. There comes a tipping point in the auto-enrolment cycle and we know what smaller employers need.

“Our member charge is one of the lowest on the market and if we are to continue serving this market we want to make sure we have an appropriate charge basis so we can sustain the service we’re really proud of.”

Members currently pay a 0.5 per cent annual management charge but Heath-Lay plans to lower fees further once the scheme achieves sufficient scale.

He says: “It’s difficult to put a number on it but I don’t think it will be too long before we think about reviewing long-term pricing. We’ve had a very successful early part of the market and we know how to make scale work.

“There are challenges but hopefully we’ll be able to lower charges within the next 10 years, probably less. But it depends how many more policy changes the Government will throw at us and how many more people we’ll have to bring in to deal with those.”

As well as The People’s Pension, B&CE operates one of the largest stakeholder schemes in the UK. When the freedoms hit, the provider experienced a 60 per cent increase in requests from members, many of whom had very small pots, to take their money out.

The provider led calls for regulatory risk warnings to be removed for pots under £10,000, arguing that the administrative burden on providers outweighed the benefit. The FCA has since confirmed the warning will no longer be a requirement; however, Heath-Lay says the industry is still learning to deal with the implications of the reforms.

He says: “It was a real challenge when the freedoms came in but it just wasn’t possible to introduce the whole set of freedoms. We tried to target the 95 per cent of policyholders to get the stuff in they needed. We couldn’t bring in the flexibility the larger pots needed, but that’s something we are trying to deal with.”

Members can use new withdrawal option uncrystallised funds pension lump sums to take parcels of cash from their pots, but cannot yet enter flexi-access drawdown.

But leaving members to fend for themselves on the open market does not sit well with Heath-Lay.

He says: “Most of our members at the moment do not have pots that would really warrant a sophisticated product, so we’re generally having to pass them to the open market. But we will have to look at whether that’s acceptable and whether there are other options out there.

“In the long term we should be trying to ensure we have our own or as good a tie-up as we can have so we have confidence where the membership are going and they won’t be ripped off. We don’t like the open market bit, just saying ‘we’re sorry we can’t help you’.

“We’re having to play catch-up.”

CV

2012-present: Chief executive officer, B&CE

2011-2012: Director of finance and strategic delivery, B&CE

2010-2011: Director of finance and customer development, B&CE

2008-2010: Director of finance and decision support, B&CE

2007-2008: Head of finance, B&CE

1985-2007: Various other roles at B&CE

Five questions

What’s the best advice you’ve received?

Always listen. The best ideas often come from diverse opinions and you don’t have all the answers yourself.

What has had the most significant impact on financial advice in the past year?

The freedom and choice agenda. It has really underlined the need for pension savers to have access to trusted guidance and advice in order to make the right choice for them.

What keeps you awake at night?

My eight-year-old son, wandering round the house in the middle of the night.

If I was in charge of the FCA (or TPR) for a day I would …

I would take The Pensions Regulator job in a heartbeat, then I’d knock on the pensions minister’s door to demand that the mastertrust assurance framework be made compulsory to protect savers from schemes that haven’t been independently assessed.

Any advice for new advisers?

There’s a huge demand for adviser support on auto-enrolment. It’s definitely an opportunity.

Supermarkets: when too much space is a bad thing

It has become popular to think that the large superstores which are the hallmark of British supermarkets have become largely obsolete.

Click here to read the full article

FCA probes advice consolidators

The FCA has written to financial advice consolidators requesting information on suitability processes when acquiring new firms, Money Marketing can reveal.

The regulator is understood to have asked firms to provide details of their business plans for the next year, as well as details of how they treat customers gained through consolidation.

In particular, the FCA is seeking reassurance that consolidators are carrying out adequate suitability checks before shifting newly acquired clients onto their own panel of providers.

The regulator is also understood to have asked whether firms are automatically inserting new books of clients into their own investment proposition.

It is not yet clear how many firms have been contacted as part of the exercise.

An FCA spokesman says: “As part of the FCA’s supervisory model, we will from time-to-time ask firms to give us more information on how they operate. We do this to get a better understanding of the firms we regulate, how the market is working and to see how consumers are being served.”

The process is not part of a thematic review, but is an initial attempt to gather information from what the regulator deems to be “an area of interest”. It is the first time such an exercise has been carried out among advice consolidators.

Osborne: EU transaction tax ‘may not see the light of day’

Chancellor George Osborne has cast doubt on whether EU plans to implement a financial transaction tax will go ahead.

Speaking at the Treasury committee today, Osborne was quizzed by Conservative MP Jacob Rees-Mogg on whether the Government’s plans for a renegotiated relationship with Europe would see the UK required to collect tax on financial transactions taking place through London.

Currently, the UK will not join the plans for a FTT, but Rees-Mogg argued the attractiveness of London as an international financial centre could still be hit by a requirement to collect tax on behalf of members who are participating.

However, Osborne said: “To be honest, there’s not actually much of a proposal on the table at the moment. Although I’ve sat through interminable meetings about whether they are going to introduce one, it doesn’t seem to be seeing the light of day.

“Maybe good sense is prevailing on the councils of Europe.”

In September, EU economics commissioner Pierre Moscovici described a deal on the FTT as “within reach”.

Originally planned for implementation in 2014, finance ministers from Germany, France, Italy, Austria, Belgium, Estonia, Greece, Portugal, Slovakia, Slovenia and Spain now hope to have a transaction tax in place by 2017.