In September, Property valuations Adelaide was able to announce a successful conclusion to negotiations on the cross-subsidy of regulatory fees. Finding the right level of PII cover at the right price has become ever more difficult for many IFAs. It is a hard problem to solve because it is subject to so many external pressures. But the premiums have shot up – a problem across the insurance industry since the events of September 2001. An outbreak of complaints about the ‘safeness’ of split capital investment trusts earlier on in the year, has also exacerbated the problem.
Through the PI Forum, which we set up just under three years ago, we have discussed the problem at length with the PI industry and the FSA. We have pressurised the FSA to review its rules and look at the degree of prescriptiveness. The FSA is taking a more sympathetic approach to those IFAs who, through no fault of their own, are unable to get compliant cover. At their request, we have surveyed our members in order to collect some ‘hard data’ so that they can gain a better picture of what is going in the market. Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
For much of that time it has been beneficial, at least for younger people, to do so; however, in recent years the decision has been less clear-cut because of a number of factors. Contracting out of S2P enables an employee to exercise some measure of control over that part of their pension provision, including where to invest it and (within limits) when to start drawing it.
The pot is also available on death to provide benefits for survivors. It also removes, to some extent, the effect of political decisions on the future payment of that benefit. A good reason to contract out of S2P would be the prospect of a bigger private pension elsewhere.