On 21 April the EU confirmed the introduction of ‘sustainability preferences’ under MIFID II, as a top up to the suitability assessment.

This means that EU investment advisers (financial advisers advising on investments) will be required to obtain information not only about the client’s investment knowledge and experience, ability to bear losses and risk tolerance as part of the suitability assessment, but also about their sustainability preferences. This will ensure that sustainability considerations are taken into account on a systematic basis when advisers assess the range of financial products in their recommendations to clients.

HM Treasury and the FCA, due to the UK leaving the EU, will not be automatically onboarding any new MIFID regulation or directives. However, they have clearly stated that they are looking to at least match the ambition of the EU. In the recent letter to the FCA, HM Treasury indicated that the future objectives of the FCA must be aligned to mobilising private capital (investment and pension funds) to meet the Net Carbon targets set by the UK Government by 2050.

The response from the FCA came through a virtual town hall meeting on 13 April where they stated:

“Financial markets will have a crucial role to play in making the transition to a carbon neutral UK, and as the supervisor of these markets, we intend to play our part.”

The direction of travel in this space is indicating that there is every probability that the UK (FCA) follow a very similar path, therefore advisers may want to start or enhance the process of embedding Responsible Investment into their investment strategies

FOR MORE INFORMATION

Sustainable finance package | European Commission (europa.eu)
EU Commission Delegated Regulation 2616 of 21.4.2021

Chancellor of the Exchequer Rishi Sunak has formally written to Nikhil Rathim, Chief Executive of the FCA, with notification that the government now requires climate change to form part of the regulator’s core remit.
What does this mean for UK Financial Services? The key part of the letter was section (vii) of Part B of its annex. This states the government’s ambition to deliver a financial system which supports and enables a net-zero economy by mobilising private finance towards sustainable and resilient growth. It requires that the FCA should have regard to the government’s commitment to achieve a net zero economy by 2050 in the discharge of its functions related to your clients’ pensions and investments. We believe this is a clear indication of the direction of travel for regulation in the advisory marketplace.

FOR MORE INFORMATION

https://www.gov.uk/government/news/climate-considerations-now-fully-embedded-across-uk-principal-financial-regulators

The FCA has published an evaluation of its work on the financial advice market, assessing the impact of both the Retail Distribution Review and the Financial Advice Market Review. Here is what the FCA found.

FOR MORE INFORMATION

https://www.fca.org.uk/publication/corporate/evaluation-of-the-impact-of-the-rdr-and-famr.pdf

Economic Secretary to the Treasury confirms Government plans to increase the minimum pension age from 55 to 57 from 2028 in response to a question from Stephen Timms of the work and pensions select committee.

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https://questions-statements.parliament.uk/written-questions/detail/2020-08-28/81494

The Supreme Court has ruled that Mrs Staveley’s pension transfer (when she was in serious ill health) was NOT a transfer of value for Inheritance Tax (IHT). The Court also ruled that her omission to take benefits from the scheme in her lifetime WAS a disposition and chargeable to IHT.

FOR MORE INFORMATION

https://www.supremecourt.uk/cases/docs/uksc-2018-0208-judgment.pdf

https://www.supremecourt.uk/cases/docs/uksc-2018-0208-judgment.pdfhttps://www.supremecourt.uk/cases/docs/uksc-2018-0208-press-summary.pdf

HMRC has published its Agent Update: Issue 79. They provide some context and clarity regarding the recent amendments to the top-slicing relief legislation on pages 4 and 5. The update confirms that the new legislation will be applied to chargeable event calculations for tax years 2018/19 onwards. It also confirms that the ability to recalculate the personal allowance in top-slicing calculations does not extend to the savings starting rate band or the personal savings allowance. There are also some updates relating to the Trust Registration Service (TRS) on pages 13 and 14.

FOR MORE INFORMATION

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/908453/Agent_Update_-_issue_79.pdf

The Upper Tier Tax Tribunal has ruled in HMRC v Sippchoice Ltd UT/2018/0087 that transfers of non-cash assets do not qualify as “contributions paid” and cannot therefore attract tax relief.

This is despite the HMRC’s own guidance, in the Pensions Tax Manual, appearing to confirm that in-specie contributions may well qualify for tax relief (guidance that, at the time of writing is still available and unchanged!): https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm042100

This will be a disappointing decision for a number of pension providers, and clients, and potentially worrying if HMRC now begin demanding repayment of tax relief previously granted. It is not known, at this stage, if the judgement will be appealed. The Court judgement can be found here: https://assets.publishing.service.gov.uk/media/5eba98d4e90e0708370f980e/HMRC_v_Sippchoice.pdf

The FCA has decided to ban contingent charging for DB transfers (with carve out exceptions for clients in serious ill health or serious financial difficulty).

Other announcements include more details on abridged advice and demonstrating that the recommended receiving scheme is “more suitable” than the client’s workplace pension scheme.

FOR MORE INFORMATION

https://www.fca.org.uk/publication/policy/ps20-06.pdf

In the case of Bowack & Anor v Saxton, the judge determined that a valid trust had been created despite some of the paperwork, intended to create the trust, having not been completed.

The settlors had intended to transfer two investment bonds into trust and appoint themselves, and their daughter as trustees. The life company issued deed that they used effectively served a dual purpose; assignment of the investment bonds by the settlors to the trustees and creation of the trust. The issuing of the bonds and their assignment into trust to all take effect at or about the same time.

The off-the-peg paperwork issued by the life company was not fully completed; there was no date indicated as to the creation date of the trust, the trust property not was clearly identified (the policy numbers were not written in the available space on the form) and the additional trustee’s signature (the settlors’ daughter) was not witnessed, although the settlor’s signatures had been witnessed.

It is useful to note that a valid trust does not have to be evidenced in writing, by deed or other document, and can in fact come into existence orally or by the actions of the settlor(s) or by the operation of the law.

The judge held that as the settlors had signed the deed and their signatures had been witnessed, they had created the trust and the trust property was clearly identifiable as the investment bonds, those bonds having been validly assigned to the trustees. The date of the trust creation being when they were issued.

So not getting all the paperwork completed isn’t the end of the world then? Well not if the client doesn’t mind incurring the costs associated with taking proceedings to the High Court!

FOR MORE INFORMATION

http://www.bailii.org/ew/cases/EWHC/Ch/2020/1049.html