Danby Bloch: Alternative retirement income strategies for higher earners

The new annual and lifetime allowances will seriously limit the importance of pensions for many high earners. Thousands that currently regard their pension as the main source of their future income and capital in retirement will have to look to alternative means of accumulating wealth.

It is not just those nearing the threshold that need to avoid exceeding the new lifetime allowance of £1m that kicks off in April. Lots of people in their forties and fifties, and even many in their thirties or earlier, could be in danger of building up excess retirement sums. A pension fund could quite reasonably double in value every 10 years, assuming about 7 per cent net annual growth.

And then there are all those higher paid people with incomes of at least £210,000 a year whose annual allowance will be brought down to a measly £10,000.

Of course, making extra pension inputs before April will be a must for most higher and additional rate taxpayers if they have the headroom. But, beyond that, advisers should be thinking about alternative strategies as a matter of urgency.

Isas and collective investments

Isas make a great deal of sense for almost everyone intent on building a significant amount of capital. The new dividend tax combined with a more or less static capital gains tax small gains exemption together add up to a powerful tax incentive. And with the annual limit now at £30,480 for a couple, the speed of accumulation is rapid. Employers can contribute to an employee’s Isa but apart from the possible introduction of some saving discipline, there is not a great deal of advantage from a tax perspective. Simply building up retirement savings in collective investments makes a huge amount of sense. And for higher and additional rate taxpayers it might be worth considering UK and offshore bonds if the charges are not ridiculous and they can reasonably expect to pay less tax when they need to cash them.

Buy-to-let

Buy-to-let, meanwhile, will still be a favoured path for many, even after the Chancellor’s hammer blows to this market last year. The 3 per cent extra stamp duty on second homes and buy-to-lets from April may boost the market in the short term and then depress it for a bit later in the year, but its basic driver shows few signs of going away. Quite simply, there are not enough new homes being built in UK, especially in the most prosperous areas. It will pay to be picky about location (as always with property) and the structure of stamp duty will continue to favour smaller properties even more.

The restrictions on tax relief on borrowing for buy-to-let will slow down individual portfolio growth by reducing borrowing capacity but 20 per cent relief is still better than zero relief, which is what most other investments get.

Clients that want to use residential property to build their retirement funds will need to understand what they are getting into. Letting property to other people is much more like a business than a passive investment. Even with (expensive) agents there is likely to be some participation needed by the landlord.

The attractive sounding gross yields are quite a lot higher than the net yields. The loss of the 10 per cent wear and tear allowance will make the post-tax position a good deal less alluring too. What is more, income can come and go with tenants and voids as well as regular bouts of expenditure.

VCTs and EISs

So will the diminishing attractions of pensions lead investors to the more exotic offerings from VCT and EIS providers? Chances are they will. But, as with buy-to-let, they will also have to understand what they are getting themselves into. Of the two, my guess is VCTs will turn out to be the more popular, if only because of the potential for drawing tax-free income and gains from an investment where the annual input is limited to a pretty generous £200,000 and there is no limit on output.

Most of the focus on VCTs is on their initial offering but they are potentially very versatile vehicles, especially after the first five years. With this in mind, providers and advisers should start looking at their long-term use and how they should be designed for the future.

Danby Bloch is chairman at Helm Godfrey

Hood and Charles exit Old Mutual Wealth roles

Old Mutual Wealth chief operating officer Jeremy Charles and customer director Carlton Hood are stepping down from their roles.

Charles is to retire in the first half of this year, which the firm says was agreed when he joined in 2012 while Hood’s role is to be made redundant.

Hood – a former Channel 4 presenter – first joined the Old Mutual Group in South Africa in 2000. Before returning to work for Old Mutual in the UK in 2011, he was chief executive of confused.com.

A spokesman says Hood is “exploring other opportunities inside the wider Old Mutual Group”.

Charles will be replaced by chief investment officer Paul Penney.

In October 2015 Old Mutual Wealth launched a national advice arm, employing around 250 advisers. Earlier this month Money Marketing revealed the group’s adviser network, Intrinsic, is in talks over acquiring rival Tenet.

Wading through the qualifications alphabet soup

Now the Institute of Financial Planning has been merged into the Chartered Institute for Securities and Investment, most financial planners are getting used to the new norm. The CISI is a very different beast to the good old IFP. Not necessarily better or worse, just different. And that takes some getting used to.

One issue that has been causing a bit of unease since the merger is certifications. Certified Financial Planners can now add the title Chartered Wealth Manager to their alphabet soup of designations simply by undertaking the ‘Integrity Matters’ ethics exam and paying an admin fee of £30 plus VAT.

As someone who flunked the CWM exam a few years ago, I am not complaining. But the issue some commentators have raised is that the CFP is a QCF Level 6 qualification, while the CWM is Level 7.

So are the two really comparable? Much like the organisations that created them, CFP and CWM are different beasts. Again, one is not necessarily better than the other – they are just different.

The CFP is assessed by way of a case study, after passing an exam that tests knowledge of investment, protection, pensions, tax and general financial planning. Candidates are expected to prepare a financial plan, designed to test the application of their knowledge in these key domains, and demonstrate how they might present the plan to a client in a way that is meaningful.

The CWM, on the other hand, is assessed by three exams, covering financial markets, portfolio construction and applied wealth management. Put simply, the CFP is broader as it covers key areas of personal finance, while the CWM focuses on investments alone, albeit requiring a deeper knowledge of financial markets and portfolio construction.

This begs the question: what is wealth management in the true sense of the term? Is it the narrow focus on investment management or does it require a much broader range of skills in order to manage not only a client’s investment portfolio but their retirement, tax and estate planning as well?

Portfolio managers have hijacked the title ‘wealth manager’ for far too long. In reality, people’s wealth extends beyond their investment portfolios and, as such, effective wealth management requires expertise in other domains not covered by the current CWM exams.

However, one might argue that investment content in the CFP model could be more in-depth, and CFP holders should have to undertake an exam on portfolio construction before being able to use the CWM designation.

On this point, though, it is important to bear in mind many CFP holders would have already completed hundreds of CPD hours on investment markets and portfolio construction, and many will also hold other designations, such as the Investment Management Certificate.

What the CISI merger has done is create two different routes to gaining the CWM designation: one with a narrow but deeper focus on investment and the other with a wider coverage of key areas including pensions and tax planning.

I guess it is up to clients to choose what they prefer.

Abraham Okusanya is founder and director of Finalytiq

New State Pension – winner or loser?

By Fiona Tait, Pensions Specialist

The new State Pension (nSP) will be implemented at a maximum flat rate of £155.65 per week in 2016/17. This is good news for some, not so good for others.

Women and the nSP

I am a woman.¹ However, this does not really affect my State Pension, largely because I have been continually employed since I left university and because I still have a few (we will gloss over exactly how many) years before I reach State Pension age (SPa).

If I were 10 years older I might feel differently. Although the new state pension is probably better for me because the years when I was bringing up children are properly valued, I will also have to wait several years longer to get a pension at all than I expected when I started work. The SPa is rising for everyone but if I had been born between 1953 and 1955, the increase would have been the steepest, and I might not have realised in time to do something about it.

Also, I might be relying on getting a widows pension when my husband, as is statistically likely, pre-deceases me. If he dies or reaches his SPa before 6 April I will be covered; if, however, he is too young or too healthy I won’t. This is because from April my State Pension entitlement will depend on my own National Insurance (NI) record, not his. Women in this situation would be strongly advised to reassess their life cover in light of the changes.

The one thing I would not have to worry about, if I were close to SPa, is having paid the married woman’s stamp. My right to a Basic State Pension (BSP) based on my husband’s NI record is protected until 6 April. I’m also not going to complain that I won’t get the nSP if my SPa is 63 instead of 65, I will after all be getting my pension for longer.

On the plus side, previous credits would only have applied to the BSP element of the State Pension, not SERPS. As the nSP is a single tier system any credit will apply to the full amount, which should be particularly beneficial for women who are more likely to be in a caring role.

Contracted out benefits

I have also been contracted out of SERPS and the S2P for most of my career which will reduce my entitlement to the nSP. However, far from losing out because of this I am likely to do well under the new system.

It is true that I will not have accrued NI credits for those years and will therefore miss out on the nSP that I would have earned over this period. I do, however, have a number of years under the new system to make up some of these credits, and I will get my rebate pension and GMP on top of this, even if I eventually qualify for the maximum nSP.

Deferring the nSP

I could also benefit further by deferring my State Pension at SPa. Assuming I’m in reasonable health, with at least average life expectancy, it is a very good deal, even under the post-April rates². If I survive over 14 years my nSP will have paid out enough to offset a year’s delay in nSP and it will be indexed for the rest of my life.

Higher earners

In the long run I would almost certainly get a higher State Pension under an earnings-related rather than flat rate scheme, but that ship has rightly sailed and there are compensations. The flat rate means it will be much easier for me to understand and to estimate the amount of pension I will eventually get.

Granted, the transitional arrangements for contracted out years and pre-April state benefits require a greater level of mathematical skill than I possess, but this is a function of the existing system, not the new one. From next year, the DWP tells us, everyone will be able to access an online statement of their projected nSP benefits, together with confirmation of their NI record to date.

Conclusion

The nSP will be fairer and more transparent in the long run. The main losers are people who relied on the State Pension age remaining the same, rather than those receiving/not receiving the nSP. Given current demographic changes this was always going to happen, but had action been taken much earlier the transitional period could have been less painful.

The Royal London report 'Pensions through the ages' found that as many as 40 per cent of 35-year-olds did not believe the State Pension would even exist by the time they came to retire. I am not in this group, either by age or inclination, however I am equally not going to pin all my retirement hopes on the system remaining the same. People who can should save for themselves.

Notes

1. The more discerning readers will already have spotted this.


2. The deferral rate for individual with a sPA before 5 April 2016 is 10.4 per cent for each year of deferral. From 6 April the deferral rate will drop to 5.8 per cent
   

David Shelton: Where craft beer and wealth management collide

In many markets there is a continuing debate about the structure of the relevant sector, and the merits of large and small enterprises. Typical issues centre on which are the most profitable, when all the small firms will disappear, the market power of the larger businesses, and so on. The advice market is no exception, with supporters of both sides presenting cogent and compelling arguments.

So what are the latest views in the advice market? Current opinion and evidence seems to favour the consolidation lobby – but only just. There is a trend toward larger scale firms but also a significant number of start-ups. The role of venture capitalists and the growing interest of product providers fuels the debate and sustains the pace of merger, acquisition and change.

For the 90 per cent of firms in the advice market classified as ‘small’ or ‘medium’ in size, the question is: will this trend continue until a few firms dominate or does this run in cycles until the tide turns?

It is often helpful to seek clues from other sectors, and the brewing industry provides interesting guidance. Currently, there are more breweries per head in the UK than in any other country, which is remarkable given the dominance of the ‘big six’ in the 1970s.

The market is still concentrated in the hands of larger firms providing mass-produced brands for wider consumption, but the more special-ist ale markets show a strong trend toward smaller and localised businesses. In fact, some of the large firms are beginning to acquire their smaller rivals as a defensive measure, just as they did in the 1970s. There is clearly a cycle that looks as if either the large or small have won the battle but, given time, always tips in the other direction.

You can see the parallels and recall previous times in the advice market when larger firms actively pursued smaller businesses, followed by periods of low interest and divestment. However, the comparison may be closer than it first appears. Small firms tend to innovate and lead change, such as the current trend in brewing linked to craft beers, which are very different to traditional ale and mass-produced lager. Indeed, it is the successful craft brewers in the US and UK that are now being targeted by their larger rivals.

The advice market version of ‘craft’ is the successful and growing wealth management sector, which has expanded over the past 10 years to meet a particular gap in the market. This sector is heavily populated by smaller firms, typically up to 10, maybe 15, advisers and, as we know, offers a very tailored and different product to the rest of the market. It is, of course, the sector being targeted by the consolidators, just as the large drinks firms are targeting craft brewers.

So what should smaller advice firms do about this? It looks like one of those rare ‘win-win’ situations where individual businesses can make their own choice. As is often the case, the answer lies in the fundamental reason you are in business. Why do some firms see selling to a larger business as a natural outcome, while others want to protect their product and clients to their dying day? This dilemma is current in the drinks market, with craft brewers exhibiting both extremes of the above.

Difficult decisions

Some are happy to sell and take what comes as being part of a larger business, while others will not even discuss the issue. Neither side is right or wrong but it demonstrates the difficult decisions to be made.

For those seeking to maximise business value and sell out by a certain date, there is much to be optimistic about. As long as the business is in good shape, there should be plenty of potential buyers and at least a few that will look after your clients to the standard you have set. Make no mistake, many large firms will wish to acquire the ‘craft’ skills embodied in your business.

For those in the opposite camp, the demand for the advice market equivalent of craft beer and for firms that will evolve and innovate will continue to rise. Selling the business to future generations to perpetuate the product is an equally valid option if the requisite long-term succession planning is in place.

However, the parallels end when we consider the broad government stance to the two products – beer and advice. The message is clear enough: beer and all similar products are bad and consumption should be cut, while financial advice and all its derivatives are good and you simply cannot have too much of it. That will help, rather than hinder, the market and sustain the range of opportunities and choices for all firms, particularly those that are innovative, fleet of foot and have clear direction and principles.

David Shelton is a consultant at Stoke Bishop Associates

Robin McDonald: Brace for turbulent bond markets this year

As 2016 gets under way, we observe a US central bank desperate to move away from zero rates without distressing financial markets; an international economy trying to digest a stronger US dollar; a corporate sector that has engaged in aggressive financial engineering, issuing huge volumes of low-yielding debt to retire large volumes of equity; global bond yields close to record lows, and global equity markets close to record highs.

Our general view is that almost all assets are priced for continued low growth, low inflation and low (if not negative) real interest rates. If that is the outcome, no great shakes.

However, if the outcome is higher growth and/or particularly higher inflation, then we could see some big swings in the absolute and relative prices of bonds, equities, currencies and commodities. We are alive to this prospect as we are beginning to see accelerating wage growth in a number of economies whose labour markets have tightened meaningfully.

Traditional fixed income tends not to do well in a rising rate environment. Our bias is for history to repeat itself in this respect considering how low current yields are. If we are wrong, and longer-term yields fall as the Federal Reserve and potentially other central banks’ hike, it would be suggestive of a policy misstep, making us more cautious on the economy.

Either way, we expect bond markets in 2016 to be fairly turbulent.

Corporate credit spreads (not just commodity related) have widened over the past year, suggesting increased investor concerns about the potential for credit stress among highly leveraged borrowers. This is noteworthy, as history suggests credit spreads often narrow when the Fed begins to raise rates.

Importantly, however, the Fed does not usually wait seven years into an economic cycle before raising rates. Typically, it starts normalising one to two years into a recovery when earnings growth is strong. A key reason why risky assets have done well this cycle is that investors have been encouraged to move out along the risk curve.

How many investors who bought investment grade credit and high yield this cycle in pursuit of a higher return will retreat to less risky assets when the Fed begins normalising?

We strongly believe that when this credit cycle ends the lack of secondary market liquidity will be a major issue. Until these markets are properly tested we do not know how they will cope under current poor liquidity conditions.

So although we can be modestly more positive on credit than we were a year ago, as the degree of compensation has theoretically gone up, we have opted to retain a healthy cash balance across our portfolios. Cash has been the hot potato asset of the last seven years but we believe it will become more desirable over the course of 2016, as the headwinds for fixed income intensify.

Meanwhile, our overriding assessment of the equity market is that it is richly priced and has dubious internal dynamics. This combination does not guarantee it is going to go down a lot. But nor do we believe our base case should be that it shoots up a lot either. Of greater curiosity to us at present is the relative opportunity set that has emerged within the market.

We expect the trend of US equity leadership to flip in 2016 and for international equities to begin to outperform in both local and common currency terms. This speaks to US economic, margin and valuation cycles that are more mature than elsewhere.

In addition, Fed tightening is historically not good for US equity valuations. The reason Fed tightening cycles have not historically assured outright equity weakness is because they usually get under way early enough that earnings growth effectively trumps the de-rating that almost always occurs (the tech sector in the late 1990s was an exception).

However, with the level of US profit margins close to record highs and with earnings growth already having moderated, we ought to look elsewhere for greater returns. For as long as the US dollar remains a reasonably strong (although not necessarily strengthening) currency, our preference is likely to remain Japan and Europe where the above cycles are earlier in their evolution.

As mentioned at the outset, we consider investor positioning within the equity market to be heavily skewed in favour of the low growth, low inflation narrative. Yet with US core inflation bang on target at 2 per cent and a tight labour market, it may not take much of a spark from wages for the pendulum to swing away from the popular group of “secular stagnation” stocks towards higher inflation beneficiaries. The oil price bottoming around current levels would clearly be beneficial to this idea as well.

In summary, valuation dispersion across and within asset markets today is historically extreme. We expect 2016 to be a year of mean reversion.

Robin McDonald is fund manager, multi-manager, at Schroders

Surge in suspicious SSAS transfers following freedoms

The number of transfers to small self-administered pension schemes flagged as suspicious has more than doubled at AJ Bell following the launch of the pension freedoms.

There was a 140 per cent increase in 2015 compared with 2014 in SSAS transfer requests caught by the provider’s due diligence process.

AJ Bell says the reforms have been a “shot of adrenaline” for pension scammers with “bigger potential prizes” on offer.

SSASs have long been used for scams, typically using cashback or loan models.

However, some advisers are being frustrated by providers’ reluctance to accept transfers.

Financial Escape managing director Phil Castle is planning to go to the Pensions Ombudsman after Scottish Widows blocked a SSAS transfer because the member does not earn income from the scheme’s sponsor.

A spokeswoman says: “Scottish Widows reviews all pension transfer requests in accordance with its regulatory requirements and duty of care to its customers.

“As part of those checks, when a customer wishes to transfer to an occupational scheme, we will ascertain if the transferee receives remunerative earnings from an employer participating in the scheme.”

But Talbot & Muir head of pensions technical Claire Trott says: “It is not a requirement that they have to have earnt income in order to receive a transfer, many transfers into SSAS occur after the client has technically retired and they are tidying up their pensions.”

FCA hits back at Govt interference claims

The FCA has dismissed claims its independence from Government has been compromised and defends its approach to the scrapped review into banking culture.

Both the regulator and Government have come under fire following the decision to close the inquiry into bank culture in favour of dealing with firms individually.

But at a Treasury committee meeting today, FCA chairman John Griffith-Jones flatly denied claims the regulator was lent on to drop the probe.

When asked by chairman Andrew Tyrie whether independence had been compromised or if specific decisions had been called into question he said: “The answer is no to both. In general I don’t feel pressure and certainly on specific operational decisions – particulary enforcement – clearly not.”

Griffith-Jones and acting chief executive Tracey McDermott also defended the handling around the communication of the decision to close the inquiry.

In December 2014 the Davis Review criticised the response to a botched media briefing that sent insurers’ share prices tumbling.

But McDermott said the decision to drop the review was not market sensitive.

She said: “There was nothing secret about the decision to drop the review. We communicated with the banks, with our panels and with one of your colleagues [Mark Garnier MP], the Banking Standards Board, British Bankers Association, there was nothing secret about it it was simply an operational decision.”

She added: “I do not believe there is any market sensitivity that the review is being scrapped. I don’t think there’s been any market reaction. In terms of public interest, clearly because of the amount of attention to this over the last couple of weeks it would be difficult to say there was not a public interest. That’s why we will need to consider whether or not wecommunicate differently.”

McDermott stressed dropping the inquiry did not mean the regulator was changing its approach to improving banking culture.

Griffith-Jones added chief executive terms should be increased from three to five years. Former chief executive Martin Wheatley was ousted by the Chancellor at end of his term in September last year.

Griffith-Jones admitted morale was down at the regulator following Wheatley’s departure. An independent review into the FCA board published last week said staff were affected by public criticism.

Platform investment trust sales rise 55%

Sales of investment trusts on platforms rose by 55 per cent in the first three quarters of 2015, compared to the same period a year earlier.

Data from the Association of Investment Companies found that sales of investment trusts rose to £549m, up on the same period in 2014 when sales were £355.2m.

Sales for Q3 last year were £146m, marking the second highest quarter on record and up 26 per cent on the same quarter a year earlier.

Q3 last year was second only to Q2 2015 for the highest investment trust sales, which was when Neil Woodford launched his Patient Capital trust.

AIC chief executive Ian Sayers says: “It’s very positive to see such strong adviser demand for investment companies in the first nine months of 2015 with purchases significantly up on 2014 and an impressive 241 per cent higher than pre-RDR levels.”

Data from AIC shows the Global sector was most popular in Q3 2015, accounting for 19 per cent of purchases, while UK equity income was second at 14 per cent.

JP Morgan Asset Management head of investment trust sales Tim Mitchell says he expects demand for investment trusts to continue to rise as more investors seek alternative asset classes in the current market volatility.

He says: “Investment companies have come into their own due to their closed-end structure in terms of investing in alternative assets, given the often illiquid characteristics of these assets.

“The majority of recent investment company launches have been in this sector as alternative assets tend to exhibit low correlation to equity and bond markets and can often distribute returns in the form of attractive levels of dividend income. Volatility also tends to be materially lower than equity and bond markets.”

Get your New Year off to a flying start

Ross Jackson, Senior Marketing Manager

There’s no denying that these days we expect things quickly. You might have noticed it first-hand during the flurry and rush of the Christmas period. The fact is that in a world of smartphones, social media and click and collect, most clients expect to get an instant response and a personalised service.

And there’s no reason their expectations should change just because they’re buying protection.

Instant gratification is making us more impatient and long, complicated application forms just won’t do.

So we’ve been looking at things differently, and we’ve updated our online quote and apply service to make it quicker and easier to do business with us.

Our service works across all devices, so you can use it on your laptop, tablet or phone, giving you the flexibility to do business when it suits you – handy if you’re out and about with your clients.

It has a smart underwriting rules engine, so a client will only need to answer questions that are relevant to them. And it will give more instant decisions, saving you and your client time.

We’ve also created a ‘send to client’ option. This gives you the choice to complete the application online yourself when you’re with a client, or to start the application and then send sections to them to complete in their own time. This could be a great help if they don’t have all their information to hand during your meeting.

But we know that new technology isn’t the only thing that will make a difference to you and your clients. As well as a tailored online service, you need good working relationships that last. That’s why it’s backed by a personal service.

With us you’ll get a dedicated case manager and underwriter to look after all your ongoing cases from start to finish. You can contact your underwriter directly to check what information to include before you submit an application. And your case manager will give you regular updates by phone or email – whichever suits you best.

If you’ve not tried our new online service yet, you can watch our tutorial to find out more.

Artemis High Income: Crunches vs wobbles

Alex Ralph, manager of the Artemis High Income Fund, talks about high-yield bonds in the US and Europe – and why she favours the latter.

£4trn wiped off stock market in 2016

A total of $5.7trn (£3.9trn) has been wiped off the stock market in the nine trading days so far this year.

The $5.7bn is the GDP of the UK and France combined, says Bank of America Merrill Lynch. Volatility in stock markets, largely sparked by the turmoil in China markets and it’s knock-on effect to the rest of the globe, has led to the stock market rout.

Merrill Lynch analysts say that “clients are no longer in ‘denial’ about recession/bear market risks”. The note from analysts says clients are “not yet willing to ‘accept’ we are already well into a normal, cyclical recession/bear market”.

In the first nine days of trading, equity markets saw their largest outflows for 18 weeks, with $12bn coming out of equity markets.

Equity funds have been hit, as well as direct stock holdings, with $21bn of outflows in the period. That compares to the $36bn of equity fund outflows seen during August’s China turmoil last year.

Meanwhile, investors retrenched to bonds, which saw $2bn of inflows in the period, while money market funds saw $24bn of inflows.

Majority worse off under new state pension by 2050

Around 70 per cent of people will be worse off under the new state pension than they would have been under the old system by 2050, DWP figures reveal.

An impact assessment published today, which takes into account the final level of £155.65 a week for the first time, details the winners and losers from the reform.

While the Department for Work and Pensions says over 75 per cent of woman and 70 per cent of men will be better off, by 2050 seven in ten will be an average of £14 a week worse off.

Hargreaves Lansdown head of retirement policy Tom McPhail says: “The further into the future we go, the more losers there are. The message to those in their 20s today is that you can still look forward to a state pension but it’ll be less generous than that enjoyed by today’s pensioners.”

Hymans Robertson partner Chris Noon adds: “Far greater numbers across the whole workforce stand to lose out. While the DWP cedes this in its paper, the messaging to the public continues to focus on the winners.

“While it’s great that these people are better off, surely it’s more important to tell those who are set to lose out that they will so that they can make up the shortfall – and have time to do so. Two thirds of people in private sector DC arrangements do not save enough. Generally speaking it’s private sector workers who will be worse off under the new regime.”

Corbyn takes aim at ‘rip-off’ private pensions

Jeremy Corbyn says a Labour government would embark on “fundamental reform” to address the needs of “the real middle Britain”, including tackling “rip-off private pensions”.

Writing in the Observer, Corbyn said the party will focus on middle and lower-income voters to develop an alternative to the Tories’ “insecure and credit-fuelled economy”.

He says Labour will tackle “rip-off pensions, unaffordable housing, mounting tuition fee debt and crisis-ridden social care”.

He adds a national investment bank and the “reindustrialisation of Britain for the digital age” will replace “Osborne’s economic house built on sand”.

Corbyn’s comments echo former leader Ed Miliband, who warned “rip-off merchants” would feed on the pension freedoms.

Former shadow pensions minister and Labour MP Gregg McClymont fought a long battle to introduce a cap on auto-enrolment charges and improve fee transparency to stop savers being “ripped off” by providers.

But at last year’s Labour conference Standard Life head of pensions strategy Jamie Jenkins said scammers were preying on politicians’ rhetoric to entice savers into high risk investments.

He said: “People are reading politicians saying pensions are a rip-off, but on the other hand auto-enrolment is great, and that’s a confusing message.

“It’s easy to exploit, and people play on that rhetoric and we are almost giving them a license to do that.”

FCA admits pension freedoms cash-out blunder

FCA figures on the proportion of people who fully cashed out their pension during the second quarter of the freedoms are wrong, Money Marketing can reveal.

Since the retirement freedoms were launched in April the regulator has published two sets of quarterly data designed to show how consumers are responding to the reforms.

The latest statistics, for the three months to September last year, suggest over two-thirds (68 per cent) of pensions were fully cashed out during the period.

However, Money Marketing can reveal the figure – widely picked up in the national press – is incorrect.

As part of the data collection exercise, the regulator asked providers for data on pensions accessed. This is based on sales information supplied by providers.

However, firms were only asked to provide data on the number of pensions fully cashed out in the ‘withdrawals’ section of the information request – which includes both new sales and existing policies.

The regulator then mistakenly applied this number to the sales figure to generate the inflated 68 per cent figure.

The FCA is removing reference to the 68 per cent figure following questions from Money Marketing.

An FCA spokeswoman says: “In our recent report into retirement data we included some data on the numbers of people cashing out their pension pot. In response to a specific query we have revised the published version of the report.

“The 120,969 figure relating to customers fully cashing out their pension in the quarter is correct. This includes customers who were accessing their pension for the first time in the quarter as well as existing customers who were already in retirement income products.

“We have removed the figure of 68 per cent of new customers fully cashing out their pension, as the total customer numbers include some existing customers.

“We intend to publish a corrected figure shortly as soon as we have obtained and analysed some extra data from firms. However, on the basis of all the data we hold presently, we do not expect a material shift in this number and it is still clear that a large proportion of consumers are cashing out their pension in full.”

AJ Bell head of technical resources Gareth James says: “The initial figures were surprising to us because they were not in line with the behaviour we have seen from our customers. It’s good to see that the number of people fully cashing out their pension may not be as high as initially thought.”

Woodford to raise fresh assets for Patient Capital

Neil Woodford is looking to attract a wave of new cash into his £774.5m Patient Capital Trust in a bid to invest in a number of untapped opportunities.

In an announcement to the the stock exchange, the trust’s board said it is “currently looking at ways it can raise additional capital in the year ahead and will consult with, and gauge interest from, investors”.

The portfolio, which aims to deliver long-term capital growth by investing in both quoted and unquoted UK firms, launched in April last year and Woodford has quickly deployed the money raised by the trust.

The fund, which has a large bias towards the healthcare sector, is now almost fully invested, with the remaining cash all committed, according to Hargreaves Lansdown.

The investment trust currently has 60 holdings and Hargreaves Lansdown head of investment research Mark Dampier expects Woodford would look to add 20 to 30 holdings with any new money.

He says: “Neil Woodford believes there remain plenty of unexploited opportunities in early growth businesses. Investing in these include early-stage companies within areas such as life science, healthcare, energy, utility, technology, industrial and consumer sectors, especially in companies with new disruptive technologies.

“By contrast, he feels many other more mainstream financial assets have already been bid up too far in price.”

Dampier warns, however, that if and when there is a capital raise, a new large tranche might cause the trust’s share price to fall to a discount, to its net asset value, in the short-term.

Since its inception to 12 January, the trust has delivered a total return of -1.45 per cent against an IT UK All-Companies sector average loss of 1 per cent for the term, according to FE Analytics.

Sailors and pilots to be auto-enrolled following landmark ruling

Firms employing offshore workers will have to enroll them in workplace pensions following a landmark ruling.

Fleet Maritime Services launched a judicial review challenging The Pensions Regulator’s approach to staff who work in different locations, including sailors and airline pilots.

Fleet – which employs sailors on P&O Cruises and Cunard – argued many of its UK staff were not covered by auto-enrolment because they worked in international waters.

But in a High Court judgment Mr Justice Leggatt backed the regulator’s approach to so-called peripatetic workers.

He agreed the location of the worker’s base should be the main consideration when deciding whether or not someone should be auto-enrolled.

It is the first time TPR’s regulation of auto-enrolment has been subject to a judicial review.

TPR chief executive Lesley Titcomb says: “This ruling comes at the end of a 12 month legal challenge and is an important legal victory for us on a number of levels.

“The judge confirmed that our approach in this particular case, and our guidance on how to assess peripatetic workers for the purpose of automatic enrolment, is correct.”

She adds: “In addition this case also demonstrates that where appropriate we are prepared to defend against judicial reviews and our commitment to upholding the principles of automatic enrolment.”

Bank of England proposes tougher bonus clawback rules

Bankers could have their bonuses clawed back even if they have changed employers, under new rules proposed by the Bank of England.

The Prudential Regulation Authority plans to introduce tougher laws around bonus buyouts. This is where an organisation compensates a new employee for any unpaid bonus after they leave the firm.

The regulator believes the practice of buyouts has the potential to undermine the effectiveness of the current remuneration rules.

PRA chief executive officer Andrew Bailey says: “Having the right incentives is a crucial part of an effective accountability regime.

“Remuneration policies, which lead to risk-reward imbalances, short termism and excessive risk-taking undermine confidence in the financial sector.”

The PRA says its proposals intend to ensure the practice of buyouts does not undermine the intention of the current rules on clawback and malus – the withholding or reduction of unpaid awards – or allow employees to avoid the proper consequences of their actions.

The proposals being floated include ensuring buyouts are managed through the contract between the new employer and employee.

Under such circumstances, the employment contract would allow for malus or clawback to be applied should the old employer determine the employee was guilty of misconduct or risk management failings. The proposed rules would also allow new employers to apply for a waiver if they believe the determination was manifestly unfair or unreasonable.

Bailey adds: “Individuals should be held accountable for their actions and not be able to actively evade the consequences of their actions.

“Today’s proposals seek to ensure that individuals are not rewarded for bad practice or wrong-doing and should help to encourage a culture within firms where reward better reflects the risks being taken.”

Looking at the proposals Nick Elwell-Sutton, employment partner at Clyde & Co says: “The devil is likely to be in the detail and what mechanism the employee would have to challenge with his new employer based on a determination by the former employer that he had committed misconduct.

“Nevertheless it would be a powerful incentive to keep bankers on the straight and narrow.”

MPs to debate state pension triple-lock in welfare reform inquiry

The Work and Pensions committee has launched an inquiry into how fairly the welfare system treats different generations.

It will look at whether government policy – including the triple-lock on state pension increases – is leading to “intergenerational unfairness”.

The committee notes baby boomers are set to receive 118 per cent of what they contribute but younger people are forecast to have less wealth at every stage of their lives.

In addition to pensions, the inquiry will look at health, education and housing, and potential reform to policies such as winter fuel payments.

In October the Government Actuary Department published a note warning the triple-lock was costing the state £6bn a year.

Committee chair Frank Field says: “Voters have two priorities for welfare reform: ‘is it fair’ and ‘is it affordable’.

“Politicians of successive governments have ducked both of these fundamental questions when it comes to the different levels of income afforded to those above and others below retirement age.

“Is it fair and affordable to divert a large and growing sum of public expenditure toward pensioners – regardless of their circumstances – while mainly poor families with children face year-on-year restrictions on their income?”

Chair of the All Party Parliamentary Group on Pensions Richard Graham says: “At a time when there is significant pressure on public spending, people are living longer, pensions are starting later and care costs rising there will also always be issues about relative fairness between generations.

“How has public spending between generations altered over the years and what are the implications? The Committee will look at these issues.”

FCA requests provider data after freedoms cash-out blunder

The FCA has requested extra information from providers on full encashments from new sales during the second quarter of the freedoms.

However, the results will only be updated when Q3 statistics are published later this year.

Earlier today, Money Marketing revealed a figure published by the regulator suggesting 68 per cent of pensions bought in the three months to September were fully cashed out is wrong.

This is because the figure for total encashments during the period (120,969) – which includes both new sales and existing policies – was applied to the number of pensions accessed from new sales only (178,990).

As a result, the percentage quoted was artificially high.

The FCA has now contacted providers asking for information on the number of pensions bought during the period that were fully cashed out.

It has given providers until 29 January to supply the information and won’t produce the accurate figure until the Q3 stats are published.

An FCA spokeswoman could not confirm when the third quarter data will be published.

Standard Chartered warns oil price could collapse to $10 a barrel

Standard Chartered has warned the oil price could plunge to $10 a barrel amid fears of a further devaluation of China’s currency.

The bank is the latest institution to throw its hat in the ring and caution that it believes oil prices are set to drop even further. Yesterday, Morgan Stanley said it believes prices could reach $20 a barrel in 2016.

“We think prices could fall as low as $10 before most of the money managers in the market conceded that matters had gone too far,” Standard Chartered said, according to a report in The Times.

As of 12 January, WTI Crude was trading at $30.44 a barrel, after dropping 3 per cent on the day, while Brent Crude slipped more than 2 per cent to hit $30.86.

On Wednesday prices edges slightly higher to sit at $31.21 and $31.64, respectively.

The price of oil has already fallen by more than 70 per cent since June 2014 and the rout has taken its toll on the oil majors.

This week BP announced plans to slash 4,000 jobs, representing around 5 per cent of its 80,000 workforce, including 600 in the North Sea.

Yesterday Morgan Stanley analyst Adam Longson warned moves in China to devalue its currency could prompt another downward spiral for oil prices.

He said: “If rapid devaluation occurs, a 15 per cent [China Yuan] depreciation alone could send oil into the $20s.

“A rapid China devaluation scenario could lead to another round of commodity weakness and send oil into the $20s. $20-$25 oil price scenarios are possible simply due to currency.”

Nigeria has now reportedly called for an emergency meeting with Opec following the warning over the oil price’s potential to collapse even further.

The Times reports that Nigeria’s oil minister Emmanuel Ibe Kachikwu said several members of the 13-nation cartel want an emergency meeting in March.

“We did say that if [prices] hit $35, we will begin to look at an extraordinary meeting,” he said.

Former IA chief Daniel Godfrey joins fintech firm

Former Investment Association chief executive Daniel Godfrey has joined the advisory board of savings and investment app Moneybox.

In the role, Godfrey will be advising the technology group on regulatory issues as well as product design.

The fintech firm, which is targeting the so-called millennial generation, has raised $3m (£2m) in seed funding from Betfair and Ocado investor Samos Investments.

The funding will be used to expand the group’s core team and for the development of Moneybox ahead of its launch in early 2016.

The app will aim to enable users to round-up their digital ‘spare change’ from everyday card transactions into a stocks and shares Isa, which can be set up in minutes on their mobile phones.

Users will also be able to add one-off or recurring deposits and can customise their portfolio by choosing from a small number of funds.

Godfrey says: “For too long the investment industry has overlooked the younger generation.

“Moneybox can revolutionise the investment landscape and play a real part in helping people build a better, safer future for themselves”.

Moneybox co-founder Ben Stanway adds: “By enabling users to get started investing with just £1 and making the investment options clear and simple we hope that Moneybox can help more and more people achieve their long-term financial goals.”

Godfrey, who had been at the helm of the Investment Association since 2012, left the trade body in October last year after a number of its biggest members, including Schroders and M&G, threatened to leave the organisation.

It is understood that at the time a number of the Investment Association’s members were unhappy with Godfrey’s initiatives and felt he had become too focused on consumers as opposed to the group’s members.

Henderson Global Investors CIO Gambi leaves

Henderson Global Investors chief investment officer Rob Gambi has left the asset manager following a review of the executive committee.

A spokesperson for Henderson confirmed that Gambi left the role in December last year after it was agreed there was no longer a need for the CIO position.

In a statement, Henderson says: “The role was primarily focused on oversight and management of the investment teams globally, rather than being involved directly in making investment decisions or developing a house view.”

His role will be jointly covered by Phil Apel, head of fixed income, and Graham Kitchen, head of equities.

Gambi joined Henderson in 2014 from UBS, where he was group managing director and global head of fixed income. He had previously worked at Henderson and AMP Asset Management as head of equities and head of fixed income.

BlackRock reshuffles investment leadership

BlackRock has reshuffled the leadership across its investment business, pulling all of its active equity strategies into one team and bolstering its multi-asset capability.

The fund management group has announced that from 1 February, Rich Kushel, chief product officer and head of strategic product management, will take on the role of head of multi-asset strategies (MAS).

In addition, Pierre Sarrau, deputy CIO of MAS, will be promoted to CIO.

Elsewhere, head of international fixed income Tim Webb will become the global head of fixed income.

Meanwhile Rick Rieder, chief investment officer of fundamental fixed income, will assume the role of CIO of global fixed income.

The group says as a result of the market environment characterised by “more volatility, lower beta and increased dispersion”, clients are increasingly looking for active equity solutions irrespective of whether they are fundamental or quantitative strategies.

It has therefore decided to bring together its Fundamental Active Equity and Scientific Active Equity groups into a unified business which will be jointly managed by Chris Jones, Nigel Bolton, Raffaele Savi and Jeff Shen.

No individual fund manager roles have been altered as part of the reshuffle.

BlackRock chairman and chief executive officer Larry Fink says: “We have regularly moved senior leaders into new roles, as we did in 2012 and 2014, with very positive benefits for them, the firm and our clients.

“A deliberate and consistent approach to reshaping our organisation to maximise the full power of BlackRock – including mapping our talent to new opportunities – is something we are deeply committed to.”

FCA investigates copycat Pension Wise website

A fake Pension Wise website that purports to be a subsidiary of auto-enrolment provider The People’s Pension is being looked into by the Treasury and FCA.

Pensionwiser.com – which uses the Tripadviser owl logo – claims to be a Qrops and Sipp provider but also contains detailed information about the Government’s guidance service Pension Wise on its privacy policy page.

It is against the law to impersonate Pension Wise.

In addition, the site says it is owned by B&CE, the firm behind The People’s Pension and one of the biggest pension providers in the country.

But B&CE says it has no connection to the site.

Director of policy and market engagement Darren Philp says: “It has just been brought to our attention that a website called Pensionwiser.com is purporting to be owned and operated by B&CE.

“This site has nothing to do with B&CE. We are investigating this as a priority and will be taking the appropriate action.”

A Treasury spokesman says: “It’s illegal for a company to deliberately present themselves in a way that could confuse people into thinking they are getting independent Pension Wise guidance.

“We want to ensure consumers are not misled and that Pension Wise is a reliable and trusted brand. The FCA is already aware of this website.”

The Pensions Regulator warns half a million small employers to avoid fines

A warning has been sent by The Pensions Regulator (TPR) to half a million small employers of their risk of being fined for not taking action on their workplace pension obligations.

The Department for Work and Pensions’ (DWP) ‘Workie’ character, who first made an appearance on our screens in October last year, returns and emphasises the importance of this matter.

TPR executive director for automatic enrolment Charles Counsell said that TPR is “concerned that a minority of smaller employers are leaving things too late and struggling to comply on time”. Counsell also reinforced that: “Employers should start planning 12 months before their duties start.”

Even if your business has no staff to put into a pension scheme, you will still have auto-enrolment duties and you must not ignore these in order to remain compliant and avoid fines.

For more information and guidance through the auto-enrolment process, take a look at our useful guide; Before, at and after your staging date.

Robo-advice and new FCA rules set to take centre stage

Robo-advice, a new advice framework and the challenge of meeting new capital adequacy rules look set to be the regulatory issues that dominate in 2016.

Advice firms have been told to brace themselves for yet more change in the form of a new leadership team at the FCA, as well as reforms to the advice rulebook as a result of the ongoing Financial Advice Market Review.

The appointment of a new chief executive at the regulator is expected in a matter of weeks, with acting chief executive Tracey McDermott tipped for the role.

But independent regulatory consultant Richard Hobbs believes there is still more change to come.

He says: “Once the new chief executive is appointed, they are likely to ring the changes, both in terms of personnel and the organisation. The FCA, in managerial terms, is in a bit of a mess and the new head may set about refreshing the top team. These appointments might not necessarily be better, but they will not have the baggage of the previous team, and will come with a more open mind.”

Once the new chief executive is bedded in, they will have to quickly get to grips with the findings of the advice review, expected to be published before the March Budget.

The remit of the review, carried out jointly with the Treasury, is to examine the advice gap, regulatory barriers facing advice firms, and the role of technology in “cost-effective” advice.

It will interact with existing FCA initiatives such as Project Innovate, which aims to provide regulatory support to firms wanting to launch financial products and services.

Hobbs is concerned the FCA is pinning its hopes on robo-advice and technology to plug the advice gap.

He says: “Consumer engagement with financial services needs to be improved, and that is the elephant in the room. The great white hope at the moment is robo-advice, but I am doubtful about that.

“These systems will get better and better over time, and consumers will begin to engage with them. But this would be engagement on quite a superficial level.

“What happens when the investor doesn’t understand what they are reading? An adviser will spot a quizzical look and ask the client about it. A system can be structured to clear some of these kinds of obstacles, but it can never be as intuitive as a good adviser. Self-help can only get you so far.”

Away from the advice review, law firm DWF partner Harriet Quiney predicts there will be more fallout to come from the use of aggressive tax avoidance schemes.

She says: “HM Revenue & Customs is gradually mopping up these schemes, but there is still work to do and if advisers and accountants have been involved, they could be vulnerable.”

She suggests at a wider regulatory level the increase to capital adequacy requirements may be a concern.

Last month the FCA confirmed plans to hike the minimum capital adequacy requirement from £10,000 currently to £20,000 by 30 June.

Advisers will have to hold either 5 per cent of investment business annual income or £20,000, whichever is higher.

Higher capital adequacy requirements for smaller firms will be phased in over the next 18 months.

Quiney believes the new requirements, combined with an already challenging market for professional indemnity insurance, will make it difficult for some firms.

She says: “The FCA’s approach to capital adequacy can be quite heavy-handed. Yet equally, businesses don’t necessarily appreciate how quickly their capital can disappear if they have a number of complaints.

“Most firms don’t have to deal with a raft of complaints. But you only need one adviser to decide something like Arch cru is a good investment, they sell it to 15 people, then it falls over, then it is 15 times the cost of the excess.”

Quiney adds: “The interplay bet-ween capital adequacy and PI cover is an issue for firms, and advisers will need to think about this quite carefully.”

Adviser views

Tom Kean, Director, Thameside Financial Planning

I would like to see the absence of input from the regulator this year, but I fear what we will get is the opposite. I am not sure the advice review is going to amount to anything more than the regulator justifying its existence.

Tim Page, Director, Page Russell

The success of robo-advice will come down to catching the right wave at the right time. My big hope is robo-advice can drive efficiencies in admin and back- office systems, and ultimately translate to an improvement in face-to-face advice.

Woodford reveals his biggest investment mistake

Neil Woodford says his biggest investment mistake during his career is not investing enough in tobacco companies.

Speaking to Radio 5 live’s Wake up to Money, he said that he continues to back tobacco companies, despite other investors shunning the sector.

He said: “I’m paid to exercise investment judgement. I have to look at my investment universe and pick the best investments that I can and expose my investors to those investments and hopefully deliver attractive returns.

“And I have throughout my career believed the tobacco industry offers some very attractive characteristics. Probably, if I were to put my hand up, the biggest single mistake I’ve made in my career is not having enough tobacco exposure.”

Currently Woodford has more than £1bn invested in tobacco firms at Woodford Investment Management.

In his Woodford Equity Income fund his largest holding is Imperial Tobacco, at 7.67 per cent of the fund. British American Tobacco at 5.49 per cent and Reynolds American at 3.93 per cent are also in the fund’s top 10 holdings.

Performance attribution data published by the asset manager, which highlights which stocks have driven up performance, shows tobacco firms rank highly.

Most recent data shows that Imperial Tobacco was the second highest contributor, bringing 2.03 per cent of performance, closely followed by Reynolds American at 1.87 per cent.

China scraps trading ‘circuit breakers’

China has scrapped the ‘circuit breakers’ it introduced at the start of the week that intended to reduce market volatility, after two days of market closure.

The circuit breakers were introduced to minimise market losses and meant a 15 minute halt to trading after a 5 per cent fall in the market and a stop to the day’s trading following a 7 per cent fall.

However, markets were forced to close on Monday and Thursday this week after 7 per cent falls were recorded, with the stock exchange staying open just 870 seconds before the first trading halt on Thursday.

In a statement issued by the Shezhen and Shanghai stock exchanges they said the circuit breakers were being suspended to “maintain smooth operation of markets”.

The Financial Times reports that in a statement the China Securities Regulatory Commission said: “The circuit breaker mechanism is not the main reason for the market drop, but based on the experience of the two recent instances, it hasn’t achieved the expected effect, but rather produced a definite ‘magnetic effect’.”

Before the decision was announced Mark Dampier, head of investment research at Hargreaves Lansdown, said: “The system doesn’t work and until it is withdrawn or modified we can expect to see further use and perhaps shorter trading periods than we saw last night.

“The interference by the authorities is simply delaying the inevitable. The market needs to find its own level so we will see more volatility in global markets until it does.”

JP Morgan UK sales head exits

JP Morgan Asset Management head of UK funds field sales Mike Parsons is leaving the asset manager after almost 10 years.

Parsons has been with the firm since 2007. He was head of UK intermediary sales until the end of 2013 when he was put in charge of a newly created team of stockbrokers, wealth managers and advisers across three sales teams.

JP Morgan Asset Management declined to comment on his departure, but a spokesperson confirmed that Parsons is leaving the company.

Parsons will not be directly replaced and a new hire for a new role will be announced in due course, says the spokesperson.

JP Morgan Asset Management UK funds head Jasper Berens restructured the UK sales team in 2013. The restructure was intended to focus on the manager’s income offerings and take advantage of the Budget’s pension reforms.

Parsons said at the time: “Some firms are looking to outsource all or the majority of their investments so you need a team and a proposition for this. Other firms, which may have been more of a generalist IFA, are now moving to a wealth manager style of business.

“We decided we had to specialise our sales team to provide a more targeted level of service to each of these market segments.”

Employers failed to motivate in 2015

A third of UK employees could not name a single occasion that motivated them at work last year

New research shows UK businesses missed the mark when it came to motivating their workforce in 2015 as over a third (34%) of employees said they could not name a single occasion where they felt motivated at work last year.

The Employee Motivation: Who came out on top in 2015?’ report reveals that despite a quarter (24%) of staff saying ‘yes’ they felt motivated at work in 2015, nearly half of the UK workforce collectively felt neutral or negative feelings towards their job.

When asked how they felt about their job in 2015, employees replied:

• They loved every second of their job (14%)
• They had to work hard, but still enjoyed all aspects of their job (40%)
• They’re sat on the fence and don’t feel any emotion towards work (27%)
• It was all work and no play (7%)
• My employer expected too much from me (7%)
• I didn’t like any aspect of my job last year (5%)

The survey was commissioned by incentive and reward experts, Red Letter Days for Business, to explore one of the building blocks affecting the low engagement and productivity rates in the UK – employee motivation.

Who was motivated?

It will come as no surprise that 25-34 year olds were the most motivated at work last year; this age group are likely to be working their way up the career ladder, learning every day, and achieving promotions.

How motivated was each generation at work in 2015?

• 25-34: most motivated age group with 39% saying ‘yes’ they felt motivated
• 35-44: 24% said ‘yes’ they felt motivated
• 55+: 23% said ‘yes’ they felt motivated
• 18-24: 21% said ‘yes’ they felt motivated
• 45-54: least motivated age group with just 17% saying ‘yes’ they felt motivated

Bill Alexander, CEO at Red Letter Days for Business says: “It’s worrying that only a small percentage of each age group could say ‘yes’ they feel motivated at work. What’s more worrying is how little 18-24 year olds are driven – this is our workforce of the future therefore employers need to do more the nurture this talent.”

What factors drove motivation?

People taking part in the survey were first asked to confirm what would motivate them at work, followed by a free text box to write about an occasion they could remember that made them feel driven last year.

Top 5 motivators of 2015 were:

• I had a good work/life balance (45%)
• I have a motivating boss who is very good at their job (25%)
• I have great peers, we always manage to motivate each other (19%)
• My boss is very good at saying thank you. It keeps me motivated (17%)
• The office environment is very motivating (16%)

However, when it came to the free text box over a third (34%) of employees said they could not remember a specific occasion when they felt motivated by their employer.

“It’s concerning that such a large percentage of our workforces had difficulty naming a specific time when they felt driven,” says Bill Alexander. “However, we must note that out of the employees who could remember an occasion the top responses fell into one of four categories: achieved, challenged, gained knowledge and recognised.”

What affected employee motivation?

Finally, the report explored elements that could affect motivation in the workplace such as hygiene factors and staff recognition and rewards. The results show flexibility, freedom, high quality tools and recognition are key factors that can have a positive – and negative – impact on a workforce’s drive:

Flexibility to enable staff to choose where they work: 46% of staff who could choose whether they worked at home or in the office in 2015 were highly engaged.

• Freedom to allow staff to perform personal tasks while at work: 48% of staff who were allowed to shop online while at work were highly engaged. In comparison, out of the employees who were not allowed this freedom just 27% were highly engaged.
• Provide staff with high quality tools to do their job: Half of staff who receive high quality tools at work are highly engaged.
• Recognise hard work: 82% of employees who said ‘yes’ I felt motivated in 2015, were rewarded with some form of reward or recognition for a job well done.

“This research indicates that simple hygiene factors such as where employees work and the tools they’re given to work with have a bigger impact on motivation than employers’ may think,” continues Bill Alexander.

“However, the biggest lesson we all must learn from these insights it that the most motivational elements that create memorable moments with staff appear under the four categories: achieved, challenged, gained knowledge, and recognised.

“Employers who strive towards giving their staff the opportunities to experience these four elements throughout 2016 will no doubt benefit from an engaged and driven workforce – and hopefully improve the third of employees who could not remember a moment when they felt motivated last year!”

Click here to download the full report

Data provider FE switches to clean share classes

FE will switch to clean share classes for its fund rating system, ahead of changes from the Investment Association later this year.

The data, research and ratings provider will switch the share class it uses for the basis of its FE Crown and FE Passive Crown ratings to the highest charging clean share class from 18 January.

Currently the primary share class used as the basis for ratings and sector rankings is the highest charging, including bundled share classes.

However, in February last year the Investment Association consulted on changes and determined a fairer system would base performance data on the clean share classes through which most investors access the fund.

FE data director Sam Walker says: “The historical premise for basing the rating on the highest charging share class, which has been in line with industry best practice and also the trade body, was to assure that all investors were getting a fair deal, and to ensure that all funds were being measured on the worst experience of any investor.

“Of course the limitation of this approach is that it fails to support investors looking to make new investments in clean share classes; we risk misleading people who want to conduct a like-for-like comparison on funds during their evaluation processes.”

Under the changes, asset managers can base a fund’s performance on just the history of the clean share class, or they can tack on the performance from the bundled share class.

Asset managers that had an existing institutional share class pre-RDR and converted it into an RDR share class for retail clients, rather than setting up a separate unbundled share class, could benefit from the move as they will have a longer track record for the clean share class.

The move could lead to a significant re-shuffling of sector rankings.

In its report on the issue, the Investment Association acknowledged: “Some firms may choose not to use simulated data as there is no regulatory requirement to provide simulated past performance, and that is their prerogative. This would, of course, affect the information used in comparison tables and may mean the primary share class has no performance record over longer periods and so miss out being ranked in those tables.”

FE has made the switch ahead of the Investment Association’s deadline of 18 April, with other data providers expected to make the change by April.

Morningstar and Lipper were not immediately available for comment.