Malcolm McLean, consultant at Barnett Waddingham, comments on the impending Pensions Bill:

“The Pensions Bill being published this week gives effect to the Government’s plans for a single-tier state pension for new pensioners from 6 April 2016.

“There are some clear advantages in having a largely flat-rate pension instead of the present convoluted combination of a basic state pension (based on national insurance contributions paid or credited) and a state second pension, S2P formerly SERPS, (based on the contributor’s earnings). The new pension  will be simpler,  easier to understand and, insofar as it is pitched at a level above the current means-tested pension credit guarantee level, should encourage private pension saving on top – without the current worry that low earners in particular have of overlapping and missing out on means-tested top-up benefits as a consequence.

“The single-tier pension will be of particular value to women and part-time workers who do not currently benefit much, if at all, from the second pension, many of whom will see their expected pension rise from the present basic pension level of £110 a week to £145 (at current price levels). The self-employed will also enjoy a largish increase as they are presently excluded from the state second pension.

“But, not everyone stands to gain from the changes which are essentially redistributive in nature. Whereas low earners will gain, many middle and higher earners in future could well get a lot less than they would have received from accruing significant levels of the second pension under the old system.

“There are other downsides as well. The number of qualifying years of national insurance needed for the full rate pension is to increase from 30 to 35 meaning that some  people approaching pension age who have already finished work may have to contemplate buying voluntary NI contributions which they were not expecting to have to do. At the other end of the scale the new minimum requirement to receive any state pension of 7 or 10 years will stop some from benefitting from even a partial payment. And the withdrawal of spouses’ pensions other than from a relatively few older married women could yet prove very controversial given that we don’t know for sure exactly how many married women, widows and divorcees could be adversely affected by the change.

“On the wider front, the ending of “contracting-out” from occupational defined benefit and public service pension schemes will be a source of concern for many employers. This will bring to an end NI rebates and create extra NI charges for both employers and employees. A typical worker earning the average salary of £25,000 will pay upwards of £270 a year, with the employer having to stump up £657. This could persuade a number of private sector employers either to close down their schemes altogether, or alternatively seek to increase their employees’ contributions, reduce the benefits payable, or both.

“Finally, there are the existing pensioners and those who will reach their state pension age before the single-tier comes in in April 2016. They are excluded from the new arrangements and many have expressed their displeasure at that. Given the numbers involved and the fact that the state pension reform programme is designed to be cost neutral overall it is extremely unlikely that will change in the foreseeable future.

“Overall, however, there is much to applaud in these fairly radical plans although they are unlikely to win universal approval – especially from those who stand to lose out financially. There is still some way to go before the Bill passes into law and there may yet be changes to some aspects arising from the scrutiny by MPs during the various parliamentary stages.”

So everything is crystal clear, the Retail Distribution Review (RDR) has been introduced, the Financial Conduct Authority (FCA) has banned rebates and transparency reigns in the financial industry; consumers are rejoicing – well not quite. From Key Investor Information Documents (KIIDs )to the more recent proclamation from the Investment Management Association (IMA) calling for clearer fund charges, it is evident that clarity across a sway of financial products and services is some way off and as perplexing as ever.

Given the generational shift from final salary to defined contribution pensions and the increasingly urgent need to get the nation saving to provide a half decent pension pot, let alone enough to enjoy retirement, it’s in the interests of the financial services industry for punters to understand the value and cost of financial advice, or what a product actually is.

From the consumer’s perspective trying to fathom the cost of a particular fund, what’s actually disclosed or not, even before assessing the cost of advice and other ancillary charges is virtually impossible!
I fully support Daniel Godfrey, chief executive, IMA’s call to a broad range of stakeholders to build a simple, accessible solution and develop a methodology that makes costs totally transparent to everyone.

However, as his recent article in This is Money explains, there are many hurdles to overcome. Daniel talks in good faith about players within the industry working together, but the issue that strikes me is whether the whole industry really wants to be transparent or would prefer to continue its obfuscation. Let’s face it, there is a lot of self interest in allowing the current system to be maintained rather than demystifying the whole process.

I sincerely hope that I’m wrong and that the financial services industry follows the lead of certain players to ensure that disclosure improves and costs fall. But if the point of all this transparency and clarity, forced by the regulator, was to expose the profits being made and hence drive down costs, then I fear the end consumer will be sadly disappointed, as it appears that the cake is still the same size it’s just sliced differently.

Clean share classes aren’t available to all. Investors going direct are not, in all cases, receiving the lowest or even standard management fees on funds. An unintended consequence of the FCA’s ban on rebates is that platforms are likely to demand lower management costs to gain a competitive advantage. Sounds good, but the funds that can afford to play will be those that have size and hence economies of scale. If smaller funds are then ignored this potentially reduces investors’ investment universe significantly, discriminating against the smaller more nimble, and often better performing investment houses – not good for the consumer.

Without doubt the behaviour of the industry is changing but there seems to be more dragging and kicking than willing participants – and will the consumer really benefit? Financial advisers have a major role to play in providing high quality advice to clients and the RDR changes have undoubtedly improved professional standards.  But helping them to explain the full cost of their advice and the financial products the customer invests in is essential, otherwise we will all be poorer. Let’s face it, without planning and saving for the future we risk a life of all work and no retirement. Not a pleasant thought!

Broadgate Mainland, the London-based financial and professional services public relations agency, has appointed Katie Jordan and Christina Bridge both to the position of Senior Account Executive.

Katie joins Broadgate Mainland from financial services PR consultancy MRM where she worked across a wide range of financial services sectors including platforms, IFA networks and investment management firms. Prior to MRM, Katie attended Leeds University where she holds a Bachelor of Science in Psychology and Sociology.

Christina joins Broadgate Mainland from the in-house communications team at the Investment Management Association, which she joined in July 2011. Prior to this, Christina has worked at the Association of British Insurers and holds a Bachelor of Arts in English and History from the University of Southampton.

Roland Cross, Director at Broadgate Mainland says:

“We are very pleased to be welcoming Katie and Christina to the team at Broadgate Mainland. They bring with them a wealth of experience and expertise in financial services and we believe these skills, coupled with the breadth of their industry contacts, will be an excellent addition to our steadily growing team.”

Katie Jordan, Senior Account Executive, Broadgate Mainland added:

“Broadgate Mainland has an impeccable reputation within the financial and professional services industry. I speak for both Christina and I when I say we look forward to working alongside the team to help continue to produce award winning work for the company’s impressive client list.”

Broadgate Mainland, the leading financial and professional services PR agency, has won a competitive pitch process to support the public relations activities of international consultancy firm, Moore Stephens.

Broadgate Mainland will work with Moore Stephens to develop and execute a PR campaign to promote the firm’s expertise in the financial services and insurance communities.

Jon Gibbs, Director of Marketing, Moore Stephens, says: “Our decision to appoint Broadgate Mainland stemmed from their impressive knowledge of the industry and proven success in the financial services arena. The team demonstrated a clear understanding of our aims for media engagement and is well positioned to assist us in achieving our business objectives.”

Roddi Vaughan Thomas, Executive Director at Broadgate Mainland, says: “Moore Stephens has built a strong reputation as one of the leading international accounting and consultancy firms, assisted by the growth of its financial services and insurance practices. We look forward to utilising our experience to help strengthen Moore Stephen’s profile in these key markets.”

The account will be run by Broadgate Mainland’s Mark Knight, Roddi Vaughan Thomas, Alistair Scott and Cara Penkethman.

Ends

For further information, please contact: 

Broadgate Mainland

Mark Knight/ Roddi Vaughan Thomas

Telephone: 020 7726 6111

Email:MooreStephens@broadgatemainland.com 

The University of Westminster graduate collections will kick start graduate fashion season in style when it hits the runway on Thursday, 23 May, 2013. The BA (Hons) Fashion Design students will showcase their designs in front of an audience of fashion luminaries at the University of Westminster Ambika P3 venue in central London.

This year’s students have benefited from internships at some of the world’s leading fashion houses including Alexander McQueen, Ann Demeulemeester, Burberry, Celine, Donna Karan, Givenchy, Haider Ackermann, Iris Van Herpen, JW Anderson, Lanvin, Meadham Kirchhoff, Proenza Schouler and Stella McCartney.The University of Westminster graduate runway shows are eagerly anticipated in the fashion world and the BA (Hons) Fashion Design degree course leads the way in producing eminent and creative designers who go on to work across all levels of the international fashion industry. The course has a strong reputation within the industry and previous graduates include Christopher Bailey, Ashley Williams, Claire Barrow and Stuart Vevers.

Last year’s show saw the debut runway collections for both Ashley Williams and Claire Barrow. Ashley Williams’ designs made headlines with her Texan-inspired collection which was modelled by Pixie Geldof and Alice Dellal. Williams presented a kitsch take on Americana and has since gone on to show great acclaim at London Fashion Week in February as part of Fashion East and was named in The Times Power 100 list and The Evening Standard’s “25 under 25” to watch list.

Claire Barrow debuted at the University of Westminster runway show last May before joining Fashion East for London Fashion Week in September 2012.  With commissions for Rihanna and a collaboration with Joseph under her belt, ‘fashion artist’ Claire Barrow is heralded as one of London’s most promising ‘ones to watch’.

Andrew Groves, course director of the University of Westminster’s BA (Hons) Fashion Design, said: “Once again the fashion students have showed great creativity during their time at the University of Westminster and their debut runway collections are a clear testament of their originality and talent.

“Our strong links within the international fashion industry give our students access to prestigious placements with top design houses across the world and provides them with solid experience which they can use to launch their careers in what is a highly competitive environment.

“This year’s graduate show will reveal some exciting surprises, with students taking their inspiration from a diverse range subjects including crushed cars, pagan folk rituals, and the late Princess Diana, this should prove to be a runway show not to be missed.”

This week saw the third ‘BM Network’ event take place where around 40 clients and contacts of Broadgate Mainland heard motivational speaker and ultra marathon runner, Chris Moon, discuss ‘Succeeding in Adversity’.

The event, which took place in the Studio Bar at the Andaz Hotel, allows our clients to meet and network in a relaxed environment.  They were able to cement previous relationships, add to their own contacts and develop new business opportunities.  On previous occasions, our events have seen new commercial tie ups formed after introductions on the night.

The highlight of the evening was undoubtedly the speech by Chris Moon.  Chris, an ex army officer, survived capture by Khmer Rouge guerrillas in Cambodia, then whilst working for a mine clearing charity in Mozambique, Chris was seriously injured losing his lower right arm and leg. Within a year of leaving hospital, Chris ran the London Marathon. Over the years he has raised several million pounds for charity and now runs the world’s toughest ultra-marathons and extreme races including the Badwater Death Valley ultra-marathon and the marathon des sables.  Chris has truly had firsthand experience on ‘Succeeding in Adversity’.

The event had a fantastic turn out from Broadgate Mainland clients, colleagues and friends, and we are already looking forward to organising the next event.

Alternative fund services unit also wins CustodyRisk magazine award for

 ‘Most Innovative Project of the Year’

 BNY Mellon, the global leader in investment management and investment services, has been named ‘Best administrator over $30bn – single manager’ for the second year running at the HFMWeek European Hedge Fund Services Awards, presented in London on April 25.

BNY Mellon was one of six industry-leading companies to be nominated for the honour as part of the 2013 awards, which recognise firms that have outperformed their peer group over the last 12 months. Companies are judged both quantitatively and qualitatively, based on financial progress, growth, and innovation across a number of areas.

BNY Mellon won the award for its commitment to excellence in client service, which has driven sustained growth of its hedge fund administration business. HFMWeek is an international publication for the hedge fund community, read by over 7,000 alternative fund managers – predominantly COOs and managing partners – and their advisers worldwide.

“In a crowded and competitive space, BNY Mellon consistently distinguishes itself with technologically proficient, high-touch and innovative service. This was underscored by the judges, who said that BNY Mellon is always astute in determining and meeting client needs,” said Tony Griffiths, editor, HFM Week.

BNY Mellon also won the Custody Risk 2013 Americas Award for ‘Most Innovative Project of the Year.’ Last year, the company became the first alternative investment fund administrator in the industry to streamline the post-trade cash settlement process by automating money movements for its hedge funds, fund of funds, and private equity clients around the globe.

“These two awards reflect our relentless focus on outstanding service and market-leading technology to support our clients,” said Marina Lewin, global head of sales for BNY Mellon’s alternative investment services business. “With AIFMD implementation fast approaching, we’ve been working closely with clients to ensure they’re prepared for the operational and regulatory challenges it entails. The strength of our full service offering is a big reason why we continue to grow our alternative assets under administration.”

A recent survey conducted by BLP (Building LifePlans), the building defects insurance providers has found that only half of commercial property professionals believe that we have seen the worst of the recession and that banks lending to more businesses and low interest rates will be the best way to get the commercial property market onto a more secure footing.

When asked whether they agreed with the statement that the worst of the recession is over, 9% of those commercial property professionals surveyed said they strongly agreed and 44% agreed slightly.  Twenty nine per cent disagreed slightly and 18% disagreed strongly. 

When asked what should be done to get the commercial property market onto a secure footing, 81% felt that the banks needed to start lending more to business and 59% said that continued low interest rates would help to kick start the commercial space.  Fifty three per cent thought that a reduction in business rates and taxation would also help. 

Interestingly, the results showed that 45% wanted to see conversions of empty buildings for alternative uses with 38% calling for an ease on planning regulations to allow for more commercial developments. Twenty three per cent wanted a bigger focus on high streets and 20% would like to see more ‘Enterprise Zones’ with incentives for businesses to re-locate.

Chris Loerns, Underwriting Director, BLP said: “We’ve seen a surge of optimism in the markets over the last few weeks as the FTSE shrugged off fears of a global recession by reaching its highest level since early 2008.  But despite this, the commercial sector is still sitting on the fence and waits to see if in fact we are at the tail-end of this recession, or if the worst is still to come.

“While we are starting to see signs of consumer confidence returning which is good news for retail, the rest of the UK commercial sector still faces a tough environment as more tenant defaults are expected this year.  In truth, the commercial sector has struggled for some time as lenders tightened their belts and although the value of properties decreased in many cases, the rents only saw upward movements making it difficult for tenants to keep their businesses above water.”

Gold will resume its long-term uptrend – comment from Angelos Damaskos, CEO Sector Investment Managers and fund adviser, Junior Gold

The recent breakdown in the gold price could be the capitulation some investors have been waiting for, and therefore a buying opportunity. Many have been arguing for some time that the bull market in gold is over as the global economy appears to be growing again.  Quantitative easing and other liquidity measures by central banks around the world have boosted asset classes such as large capitalisation equities and property, but inflation, so far, has been low. Interestingly, the sell-off in gold coincided with news of the Chinese economy slowing which, arguably, should have produced the opposite effect. We believe that gold will soon resume its long-term uptrend.

The world is still suffering from the effects of deleveraging and government policy measures raise risks on the downside. The recent Cypriot debacle, where Eurozone politicians attempted to enforce taxation on insured depositors’ savings, demonstrated their desperation in tackling regional bailouts. The US appears to be losing its momentum of economic recovery and the Federal Reserve continues to print record amounts of money. Any deterioration in the geopolitical instability of Africa, the Middle-East and Asia could raise further, much larger risks. In times like these, some insurance against the unexpected is necessary – this has been the function of gold since antiquity.

In the portfolio of Junior Gold, approximately 75% of our holdings are well capitalised, producing companies with operating cost structures well below the current gold price. These companies can continue operations for prolonged periods of lower prices due to their low debt and fully funded activities. About 15% of the portfolio is invested in near-term production companies that have recently raised sufficient funding to complete construction of their mines and plan to start production in the next twelve months. The balance is held in development stage companies that are preparing feasibility studies on potentially large mines.

We believe that the loss of value witnessed in small and mid cap producers  is due to lack of investor interest in smaller gold mining shares, and concerns that they cannot prosper in the current environment. Selling has been indiscriminate, ignoring companies’ ability to generate profits with gold prices at current levels. While it is true that many undercapitalised explorers and promoters of marginal assets may disappear in the current malaise, we remain confident in the fundamental strength of Junior Gold’s investments and, therefore, in their recovery potential.

Gaps in warranty cover can be removed to free up capital

BLP (Building LifePlans), the residential and commercial building defects insurer is claiming that development funders’ typical development warranty cover does not have sufficient limits to cover the full cost of developments for a growing number of schemes, leaving them potentially exposed to any shortfall should a building defect arise – having to reserve capital to cover the shortfall themselves.

The insurer believes that commercial and high-end residential conversions are most exposed due to warranty provider cover limits of £500,000 per unit within the development. According to the insurer, London in particular carries the greatest risk in this regard with many conversions creating units worth well in excess of £500,000 and in some cases more than £1 million.

Brian Kilroy, sales manager at BLP Insurance, says: “Funders are aware that warranty cover leaves them with a headache as to whether to reserve capital to cover defects on their builds or take the risk and use that capital for other developments. We are urging them to consider building/latent defects insurance instead of a warranty since the building is insured to its full rebuild value rather than the limits of a warranty; immediately freeing up capital for other developments and also preserving the value of their investment.”

Much time and consideration goes into the contract negotiations between funders/investors and developers, however the latent defects cover is often taken for granted, leaving lenders and investors potentially exposed to some significant risk.  While it is possible to sell or lease commercial property without latent defects insurance, many lenders are now insisting on it, particularly for residential developments. Funders are also beginning to request it as a way to protect their investment, against the consequence of building failure, or simply to make their offer more attractive to potential commercial tenants.

Further, defects insurance allows for full risk transfer after just 12 months, unlike its competitors who make the developer liable for 2 years.  As a result of this, many banks, investors and funders are now insisting on latent defects insurance on all schemes before they will consider a partnership or any type of development involvement due to restrictions in developers claiming on a warranty.

Kilroy says:  “If a funder is acting as development partner, perhaps within an SPV, and intends to retain units for rental purposes, the 3rd party warranty will not respond. So, yet again, the funder is left with no cover for their investment.”