AIFA responds to government proposals
July 24, 2007 by admin
Filed under News, News-Banking
Recently the government announced its intentions to crackdown when it came to Independent Financial Advisers to ensure that consumers were receiving sounds advice based on their needs rather than on which lender would be the IFA the most money in commission.
The government stated that financial adviser services would become more standardized and that those wishing to operate as independent advisers would have to seek payment for the advice from the customer and not from the lenders that he or she recommends.
The European Commission has also put forward a green paper that recommends a single, standardized European market.
Chris Cummings from the Association of Independent Financial Advisers stated: “The EU should be mindful that the UK retail financial distribution market is unique because the majority of business in retail financial products is arranged through intermediaries. The delivery of this advice, according to Deloitte research, has the potential to improve the wealth of low to medium income earners in the UK from £38bn to £78bn even if only 10% were to optimise fully the advice given.”
He added: “We support the Commission’s views that there must be a rigorous and thorough analysis before introducing any new regulations, which takes into account both the benefits and the cost to firms and consumers, and the impact on the market. There are many reasons why consumers are naturally restricted from using cross border financial services such as language, taxation, social welfare and currency. The Commission must consider these issues before seeking to force standardisation that will not benefit consumers.”
A letter that has been signed by a number of industry professionals has been signed and sent to the commission to urge officials to improve their knowledge of consumer demand before any action is taken on this issue.
Tom Smith
24th July 2007
Endowments Still Failing
July 18, 2007 by admin
Filed under News, News-Mortgages
Despite the last four years seeing a rising stock market, millions of endowment policies are still unlikely to be worth enough to pay off the mortgages they were meant to cover.
There have been soaring share values around the world, and record growth in commercial property, but for six million mortgage endowment policy holders in Britain it will still not be enough.
The Association of British Insurers has produced figures that reveal that to the end of 2006, two thirds of endowment policies in force were still in the red band – that is, they will not deliver the target sum upon maturity. Those achieving a green rating were only 18%, and should deliver the target amount. The figures are only marginally better than at 2004, when 71% were red and 14% were green. Amber policies make up the rest – these are at risk of not paying the intended maturity value. The booming stock and property markets do not seem to have had much of a positive effect on these policies.
Deeper investigation shows that the overall trend disguises huge differences between insurers. Where there are some companies forecasting that nearly all their endowment policies will hit the targets, others have only a meagre number that are expected to deliver the goods.
Sadly it is some of the bigger companies, who between them number two million endowments, who are failing. Norwich Union, Standard Life and Friends Provident are those with the highest number of prospective shortfalls.
One couple in Fareham, Hants have two endowments they hoped would pay off their £41,300 mortgage. A Legal & General policy started in 1983 is due to mature next year and is expected to beat its target of £22,800 by around £2,000. The other policy was taken out with Royal Insurance in 1988. It is now run by Phoenix, part of Resolution. Due to mature in 2013, the latest projection in spring suggested it would fall short of its £18,500 target by somewhere between £5,000 and £7,000. They will have to re-invest the £2,000 from Legal & General to help pay the shortfall of the Phoenix policy.
The Phoenix policy’s recent performance has been poor, giving returns almost less than investment. How can that be the case with such good growth in the markets in recent years?
Most endowment policies are invested in “with-profits” funds. These spread the money from savers across a number of assets that include shares, bonds and commercial property. In the past five years shares have managed average returns of 10%, and commercial property has average returns of over 15% in the same period. Bonds only grew by an average of 4.6% per annum, and the in past twelve months have actually gone down in value. The problem was that many insurers got cold feet in the share and property market in 2002 and 2003, and transferred large parts of their funds to bonds. Thus, the funds have failed to take advantage of the rising stock market and commercial property prices.
Small companies Wesleyan and Liverpool Victoria have no policies in the red, and Legal & General now has half of its policies in green, up from 20% in 2002. Conversely Standard Life has 88% policies in red, up from 68% in 2002.
It seems that most endowment investors have missed out as equity markets have soared.
Tom Smith
18th July 2007
Three billion barrier smashed by Icesave
June 7, 2007 by admin
Filed under News, News-Banking
In a recent announcement Icesave, which only launched in October 2006, has revealed that since its launch it has taken over three billion pounds in deposits and has opened over eighty thousand savings accounts.
Part of Iceland’s Landsbanki, Icesave officials feel that the combination of easy, convenient online savings management along with highly competitive interest rates has helped to secure this level of success in such a short period of time.
Icesave has been offering interest rates in nearly six percent to savers, with a minimum account balance of £250 and a maximum of £1000,000. There is no penalty of loss of interest for withdrawals on the accounts, and all that is required of savers is for the account to have a t least £250 in it at all times. Those wishing to open an account with Icesave must be over the age of eighteen.
On the other hand the Dutch bank ING has seen around £3M worth of deposits withdrawn from its operations after failing to pass in interest rate rises to savers. Although ING is planning to pass on the latest interest rate rise in June, the interest rate has been stagnating at under five percent for some time, which has outraged savers, many of whom have decided to try and open accounts elsewhere in order to get a better rate of interest.
One official from the online savings operation Icesave stated: ‘In achieving this new milestone of £3bn in total deposits, Icesave has shown Landsbanki’s ability to diversify its balance sheet and develop its proposition in the UK market place.’
Icesave has guaranteed customers that the AER on savings accounts will exceed the Bank of England base rate by at least 0.25% until 2009.
Tom Smith
7th June 2007
Over six billion in premium bond sales
June 7, 2007 by admin
Filed under News, News-Banking
With a number of juicy million pound jackpots up for grabs next month, there has been a massive boost of six billion pounds in premium bond sales.
Savers are ploughing in billions into Premium Bonds in the hope of becoming one of the lucky few that become a millionaire when the draw takes place in June. The million pound jackpots are part of the fiftieth birthday celebration for Premium Bonds. Five people will be drawn as million pound jackpot winners next month as part of the celebration.
Last October saw sales of over two billion pounds worth of premium bonds, which was the highest monthly total on record. Since the start of the celebrations, over six and a half billion has been invested in premium bonds by savers. Half a million new savers have also jumped on board during this period, which gives Premium Bonds a customer base of nearly twenty four million savers.
June’s draw will see a record number of bonds, and there is now over thirty six billion invested in Premium Bonds in all. One draw has already been completed in December, which was also part of the celebrations and also saw five bondholders become millionaires. And with the forthcoming draw record number of bondholders can look forward to the chance to become very wealthy.
A spokesman for Premium Bonds stated: ‘The past eight months have seen a huge surge of interest in Premium Bonds. Despite being launched 50 years ago, they continue to attract new customers. In just the last eight months, over half a million people have begun saving in Premium Bonds for the first time. The anniversary draws, combined with the ease of investing online have appealed to old and new customers alike.’
Tom Smith
7th June 2007
