Statement library

James Heal, Director of Public Policy at St. James’s Place comments:

“As the UK’s largest provider of financial advice, we have always believed that part of the advice gap can be filled by more advice. However, we recognise that targeted support could be a positive new addition to the tools available for consumers who may be unclear about how to start or continue their journey with investing and making better financial decisions.

“It is vital that it is clear for consumers, at the point of use, what a service is and isn’t. Targeted support must not be confused with financial advice if consumer harm is to be avoided. Users of targeted support will share some characteristics with a generic segment of customers and there should be helpful actionable steps available without the customers perceiving that they have been told what to do.

“The industry will most effectively be able to design their own targeted support offerings if the rules are clear about what targeted support is and isn’t. We are pleased to continue to work closely with FCA and HM Treasury as they finalise these proposals and rules.”

St. James’s Place welcomes the announcement of the next phase of the Advice Guidance Boundary Review and looks forward to continuing our collaboration with the FCA, HM Treasury, and the wider industry to help finalise this critical area of regulatory change.

Ian MacKenzie, Chief Operations & Technology Officer at St. James’s Place, said:

“We are passionate advocates of personalised, face-to-face advice, and we strongly believe that increasing the availability of advice is key to addressing the advice gap. However, we also recognise the need for more to be done for consumers who do not currently receive any form of advice. The proposals around Targeted Support present an excellent opportunity—both for consumers and the industry—to bridge this gap.

“Targeted Support should provide a framework that enables consumers to make better-informed decisions. If we clearly define what Targeted Support is—and, crucially, what it is not (i.e., it should not be mistaken for advice)—it has the potential to be far more beneficial to consumers than current guidance. 

“There are likely to be multiple avenues for firms supporting retail investors to utilise these proposals in developing new services for those not yet ready to receive advice. We also see opportunities to assist clients who have invested but may no longer be receiving advice to help support their financial goals.

“We look forward to continue working with the FCA, the Government, and the rest of the industry to finish shaping the designs of these important reforms and ensuring that they serve the needs of consumers and clients.”

“We welcome the policy paper on advice guidance. As the paper states, there is unlikely to be a silver bullet solution. One way to fill the advice gap is through greater availability of advice, but we agree it will also likely need to include methods to help improve the availability of guidance, some form of simplified advice in a specific set of circumstances, as well as a greater public education about what is available. The proposed mix in the paper seems to be a sensible way to start.

“As we look to work together to find solutions, we will need to ensure a situation is not created where a consumer may feel they have received suitable advice when, in reality, they haven’t. The boundaries between guidance and regulated advice must not become blurred to the extent that consumers are unclear about the support they have received. This will be particularly important to ensure that consumers who receive a 'people like you' suggestion are fully aware of the limitations of that guidance and that the product suggested may not be suitable. We will continue to work alongside our industry peers, Government and FCA to collectively address this issue.

“The benefits for taking advice are very clear. It makes a considerable difference to an individual’s future financial health and provides the financial confidence needed to navigate life events and periods of uncertainty, particularly when markets prove more challenging. Addressing some of the barriers to advice and better connecting people with the help they need can encourage people to take those first steps towards investing for their futures. Better planning not only serves an individual’s long-term ambitions, but also supports the economy to grow.”

Vicki Foster, Director of Responsible Business at St. James’s Place comments: 

"St. James’s Place warmly welcomes the Education Committee’s inquiry into strengthening financial education. As the largest provider of financial advice, we see the benefit of people making informed decisions with their money, and the damage to society of low levels of financial literacy. We are also passionate about creating a positive impact through committing to help improve financial education for young people.

“We are taking several steps to improve financial literacy. So far in 2023, the St. James’s Place financial education programmes, delivered by our advisers and employees to schools, community groups and in areas of deprivation, have reached 3,712 young people through face to face and virtual workshops1 led by SJP volunteers.

“In 2022, we committed to sponsoring 21 schools to become accredited ‘Centre’s of Excellence’ for financial education over the next three years in collaboration with Young Money. Our sponsorship will fund one-on-one advice from an expert Education Consultant, financial literacy training for staff, and access to financial education resources for each school. In addition to this funding, each school will benefit from the support of a local SJP office location - including work experience opportunities, mentoring, and volunteering.

“We believe there is much more than can be done in this space, and the industry, and policymakers must work together to help improve the financial literacy of the younger generation. We look forward to being a part of this change, to supporting initiatives like this inquiry, and working with others to find solutions.”

1- As of Q3 2023 there have been 156 financial education workshops led by SJP Volunteers.

Commenting on today’s core inflation figures Hetal Mehta said: 

"Head of Economic Research at St. James’s Place, said: “While today’s inflation drop to below 5% will be hailed as a major milestone in the progress to 2%, the UK remains one of the highest inflation economies. Core inflation is still stubbornly sticky at 5.7%. The next phase of inflation reduction will almost certainly be more painful for the economy as the easy wins on energy after largely behind us.”

"We can’t agree that the conclusions being drawn are reflective of the overall position.

"The lower ongoing charge under the new structure, whether investing in unit trust and ISAs or bonds and pensions, will be applied to all existing clients. The analysis fails to mention this.

"In addition, we have structured the charges so that the majority of new clients will benefit from lower charges. All new clients investing in our unit trusts and ISAs will benefit from lower charges and so will those in bonds and pensions if they are investing over the typical long term nature of these retirement products.

"Instead, the focus of the analysis is on one scenario in which new bond and pension investors save for a shorter length of time. This gives a misleading view of the overall picture and the positive benefit of the changes overall for clients.

"In the new bond and pension charging structure, we replaced the Early Withdrawal Charge with a simple initial charging structure to cover the advice provided so it is comparable with the rest of the industry. So, while some new shorter term clients will pay more under the new structure, the majority will pay less, as part of an overall reduction in charges.

"It is important to note that even for that group of potential clients the fee structure will compare favourably to the wider wealth management industry.  There has been a misperception that SJP is expensive compared to its peers. The new charging model will mean new clients will be able to easily compare with other providers before making an informed decision, and when they do they’ll find that SJP charges compare favourably across all areas."

An article has been published in the Sunday Times this morning concerning an ex-Partner, whose claims we fully reject.

"Our business sale and purchase (BSP) scheme is designed to facilitate good client outcomes by providing continuity of ongoing service to clients as successful Partner businesses grow and as Partners retire or choose to downsize their business.

"We run the scheme with a responsible lending lens and our average loan-to-values are low at c. 30%, with the average Partner who buys a business working for eight years with SJP before they choose to do so.

"We assess debt service cover and affordability at prudent levels when making lending decisions and loans are extended to eligible Partners only after a rigorous underwriting process. This assessment assumes no new business, ensuring that the debt is affordable at the time of borrowing.

"We have historically low write-off rates, which evidences the careful nature of our approach, and have a range of support measures in place to help Partners if ever needed."

Pension contributions continue to increase

“Personal pension contributions have been on the increase since 2016/17 and the year 2021/22 was no different, although the increase is only minimal. This is slightly surprising given the cost-of-living crisis was impacting individuals, having really started in late 2021. We may see more cutting back in the following year due to the pressures increasing over that period. This means that the amount of tax relief granted has again increased, but we should remember that in order to get higher rates of tax relief you do need to pay these higher rates of tax.

“The headline figures for tax relief always appear staggeringly high, but we should remember that they also increase the relief on investment income as well as the tax that would have been paid should employer contributions have been paid as income. The income tax on the employer contributions makes up the majority of this relief (59%), rather than just being paid to the high earners. In addition, employers will be receiving significant national insurance savings, compared to if they paid these contributions as immediate salary.

“Alongside this, the average contribution has dropped slightly as membership has increased a little again following the significant drop in 2020/21. This is likely to be because those who struggled to continue membership of a scheme in Covid are now getting back on their feet and into regular work.”

Annual Allowance

“The value of pension contributions attracting annual allowance charges dropped in 2020/21 following significant increases since 2015/16. But this bounced back higher again in 2021/22 with both the total number reported and the total value reported increasing significantly in 2021/22. It is difficult to pin an actual reason for this significant change, but it is at least partly because of the changes in tapered annual allowance with a drop from £10,000 to £4,000 as the lowest a person could be tapered to. However, less people should have been impacted by the taper due to the increases in the adjusted and threshold income figures. The budget changes, increasing the annual allowance and tapered annual allowance from 2023 should mean that this will come down again in the long run which will be a positive to savers.

“The complexities in this area make it very difficult for individuals to plan and get it right, without professional help. Those in public sector schemes are left at the mercy of legislation and timing of pay reviews which mean they can be impacted inadvertently with no way to control this.”

Lifetime allowance

“Although we now know that lifetime allowance charges are a thing of the past from April 2023, these statistics yet again show significant increases in the charges applying year on year to individuals with the number reported and the overall value increasing again. This is likely to be because of the frozen allowance hitting harder as funds continue to grow. We welcome the removal of these penal charges but still await the full legislation of the replacement tests, which appear more complexed although hopefully more generous for those drawing income.”

On Tuesday 26 September, The Telegraph featured an article covering several themes with a focus on St. James’s Place. These are addressed individually below.

Claims management companies

"We review all complaints on a case-by-case basis and offer redress where we recognise service has not met the standards clients should expect. We regret any occasion when a client has cause for complaint and would always urge clients to speak with us directly if they have an issue they would like to raise, rather than go via a claims management company where clients can expect to pay commission approaching 50% of any resulting compensation.

Template letters and ongoing advice

"Our SJP Partners and advisers build long term relationships with their clients and get to know and understand their needs over the long term. The ongoing review of the continued suitability of their investments to meet their financial planning goals is an essential part of the service we offer.  Clients choose to pay for this ongoing advice service as it is key in providing the confidence that financial plans remain on track over time by providing a regular opportunity to revisit investment objectives, discuss financial goals and changes to personal circumstances.

"We recently increased our support to advisers around the ongoing advice service by providing additional guidance and tools to our Partnership, which includes template letters and questionnaire our advisers can download, tailor to their clients’ circumstances and share with those clients where it has not been possible to arrange an annual review meeting in the past 12 months. This is not a mass mailing to clients but rather an additional resource our advisers can use as and when appropriate to ensure clients continue to receive the value of ongoing advice.

Bestinvest Spot the Dog

"In our view, investors should remember that past performance is no indicator of future performance, and approach short-term performance rankings and recommendations with a healthy dose of scepticism. Research clearly shows that selling poor performing funds to buy high performing funds often negatively impacts investor returns over the medium to long term.

"Analysing the 2020 Spot the Dog report by way of an example, the worst-performing funds in that report have outperformed their top-rated funds over the next three years in all but one of 11 categories, with returns being over 10% higher on average. Performance rankings such as these often have the unintended consequence of promoting detrimental investor behaviour."

"This is now the 14th consecutive interest rate hike at 5.25% as the attempts to contain stubbornly high inflation continue, and there’s no certainty that we have yet reached a peak in rates.  Inflation is still almost four times the Bank of England’s official target and, while the rate is starting to reduce, progress is slow.  

"There are certainly signs that this is starting to hit home for many people, with higher interest rates putting people off spending but also not leaving them with sufficient spare resources to save instead, not least as the cost of living continues to rise. The aim of increasing interest rates is to reduce demand for goods and services and push prices down. However, if there is too much widespread pressure on people and businesses, and consumer and commercial borrowers, it could tip the very fine balance and edge the economy into recession, without significantly easing the cost-of-living crisis.

"Evidence that house prices are starting to fall in many parts of the country could well be a sign that more expensive mortgages due to higher interest rates is having an impact on house purchases, as well as for those with existing mortgages. Anyone on a tracker, standard variable rate (SVR) or variable mortgage will be impacted immediately in an environment where mortgage rates are already the highest seen for many years. The key is to check affordability and if you are nearing the end of your fixed term, shop around for the best rates, including with your existing provider.  Budgeting and planning to ensure you can keep up repayments are essential. 

"For savers, don’t assume your existing provider will pass on the higher rates, as many banks have been very slow to do so in the past. Shop around for the best savings deals and be prepared to lock up your money for longer to achieve the best rates.  When it comes to credit, prepare not to overspend and only use credit cards and loans for spending if you know you can afford to pay it off.”

"Whilst the UK headline inflation rate remains in single digits at 8.7%%, it hasn’t fallen in May and will be small comfort to hard-pressed consumers when the CPI has risen to 7.1%. In all likelihood this could have a significant impact on the Bank of England’s interest rate decision tomorrow.”

"Inflation is putting an increasing strain on families and businesses, but there is no doubt that the Bank of England will continue to keep the option of interest rate rises firmly on the table. Ahead of tomorrow’s decision, there is little scope for easing the pressure on borrowers and it is particularly stark for those on variable rate mortgages. As for investors, they will need to continue to diversify their portfolios to ensure they are as inflation-proofed as they can be and can reduce risk when markets are volatile."

"It’s good to see that the UK inflation rate is back in single digits, easing to 8.7% for April. This is largely driven by gas and electricity costs remaining stable, rather than reducing. However, it’s clear than food inflation remains troublesome – at over 19%, a 30 year high and a reminder that prices are not falling but that the headline rate is showing a reduction in the scale of the increase. The labour market also remains tight, which in turn puts pressure on employers to increase pay in line with inflation.

"The implications are that as long as the economy can hold up, the Bank of England will keep the option of interest rate rises firmly on the table. This will add to costs for borrowers, including those on variable mortgage rates. As a result, there will be little easing on the cost of living. As for investors, they will need to continue to diversify their portfolios to ensure they are as inflation-proofed as they can be and can reduce risk when markets are volatile."

Commenting on the latest ONS Enterprise Investment Scheme/Seed Enterprise Investment Scheme tax relief statistics, Luke Barnett, head of tax advantaged strategies at St. James’s Place, said: 

“The latest statistics released for EIS/SEIS highlight the growing popularity and importance of these schemes. Pent up demand as the economic activity normalised following COVID restrictions, and strong performance across the venture space helped to shore up interest, and is likely reflected in the numbers. Investments into early-stage start-ups are crucial to the growth of our economy, driving significant research and development, building intellectual property and importantly creating skilled jobs. The availability of these schemes also helps to entrench the UK as a player within the start-up space and therefore helps to attract key talent from abroad.

“From a retail investors perspective, not only are these schemes a valuable tool for financial planning, but they also provide investors with the unique opportunity to get exposure to a bustling UK venture capital market. Largely uncorrelated returns to the broader equity markets can provide an important route to diversification. However, investments of this nature do bring with them a specific set of risks including loss of capital and illiquidity well beyond the stated minimum holding periods, and so investors should consider carefully if they meet their circumstances. We would also welcome much needed clarity surrounding the EIS and VCT sunset clause, to ensure that this very important industry continues to flourish.”

"Since December 2021, we’ve now seen 12 consecutive rises in interest rates in an attempt to quell rising inflation, but it’s not certain that it’s reached its peak at 4.5%. With only a slight drop in inflation, the Bank of England is nowhere near its official target of 2%. Prices are currently rising at more than five times the target level of inflation, so I don’t think the BoE can afford not to raise in line with other Central Banks.

"In theory, higher interest rates put people off spending and encourage them to save instead. With less demand for goods and services, prices should fall and inflation should continue to go down. However, it’s proving very challenging. In fact, putting too much pressure on consumer and commercial borrowers could put the economy into further recession, without significantly easing the cost-of-living crisis.  It’s a very fine balance. 

"Both borrowers and savers will feel the impact of a further rise in interest rates.  By raising interest rates, borrowing becomes more expensive. If you’re on a tracker, standard variable rate (SVR) or variable mortgage you will be impacted immediately – the key here is to know by how much and check affordability.  If you’re not on a fixed term mortgage or nearing the end of your fixed term, then it’s worth shopping around for the best rates, but first check that your existing provider is offering you the best deal they can.  Budgeting and planning to ensure you can keep up repayments is essential and, if you foresee not being able to, engage with your provider sooner rather than later before there are any issues.

"If you’ve got cash holdings, search the market for the highest savings rates – don’t just assume your existing provider will pass on the higher rates, as many banks haven’t in the past. For those prepared to lock your money up for the longer term, you’ll likely secure a higher savings rate.  We’ve seen over the last 11 rate rises that cash savers’ current providers often are not passing on the rate rises or are very slow to raise their rates, so savers need to shop around to secure the best deal.

"With many people facing cost-of-living challenges, ensuring you have an understanding of outgoings and monthly financial commitments is essential, particularly knowing whether these will be impacted by changes to interest rates and inflation. You need to know whether and how you can afford them. Prepare not to overspend and only use credit if you know you can afford to pay off. If struggling, reach out for advice to free sources of help, such as Nutsaboutmoney."

“We welcome the Government’ s intentions to support additional funding into social care but acknowledge more is required around awareness, including solutions for increased private funding. It’s well-known that the care crisis requires eye-watering sums of money to fix, and some form of taxation is needed to foot the bill. A rise in National Insurance makes sense due to the fact it’s simple, with the collection mechanisms are already in place. But while it has the capacity to pool risk across a section of society as a form of taxation and has the potential to be progressive, with individuals earning at higher levels contributing the greatest amounts, there are limitations.

“The 1.25% rise in N.I. is unlikely to raise sufficient funds to meet the ongoing costs for social care, let alone make a contribution to additional Covid-19 costs on the NHS. Furthermore, an increase in N.I. would not receive a contribution from those who are asset rich and income poor. Unless N.I. was extended to be payable by those over State retirement age, which would undermine the merit of being able to use existing collection mechanisms, it would not gain a contribution from those most likely to benefit.

“While it’s good to see efforts to seek to address the social care issue, putting the burden via National Insurance on generations who will, in all likelihood, be poorer than the ones that went before does not appear to be a complete and balanced remedy for the social care headache.”