Jeff Salway: It should have been child’s play, but again banks let public down

ANOTHER chance for banks to deliver what their customers want – and another wasted opportunity.

The launch this month of the junior individual savings account (Jisa) – the government’s new child savings product – generated acres of largely positive coverage. Coming ten months after child trust funds (CTFs) were taken off the shelves the arrival of the tax-free Jisas was always going to grab the attention of parents and grandparents willing to save or invest on behalf of a child.

So you can imagine their dismay on trying to open a Jisa at their bank only to be told that it hasn’t got around to offering one yet.

After last week’s Smart Money story about protests from parents angry at being excluded from Jisas because they already have CTFs, I heard from several readers who had tried to open a Jisa with their bank but found that they have to wait a few months or go elsewhere.

HSBC, Santander (which owns brands including Abbey and Alliance & Leicester), Royal Bank of Scotland and Barclays have all failed to make Jisas available, despite having had ample time to do so. Lloyds Banking Group-owned providers Bank of Scotland and Halifax will make their stocks and shares Jisas available from this Friday, The Scotsman can reveal, but cash Isas will not be available from Lloyds brands until next year.

So we have banks that are so keen to flog products that people don’t need are telling their customers that they can’t offer one for which there is genuine demand. They may claim it’s too early to gauge demand but that doesn’t stop them marketing numerous other products that customers are barely crying out for.

IN JUST over a year’s time financial services providers will no longer be able to pay commission to financial advisers for selling their products, under rules set out in the Retail Distribution Review.

Many independent financial advisers (IFAs) who intend to remain truly independent have already moved their businesses to a fee-based model in preparation for the change.

But some groups continue to favour commission-based advice and evidence is building of a late rush for commission payments. Insurer Friends Life last week said it had seen an unusually high level of corporate pension customers switching to other firms in recent months, a trend it attributes partly to employee benefits advisers “churning” customers into different products in order to claim commission while they still can.

Investors might want to ask questions if their commission-based IFA suddenly starts suggesting product switches, especially in high-commission areas such as investment bonds and personal pensions.

THE government and some investors may like the idea of the UK being a safe haven for investors. However, last week’s influx of overseas investors into the UK gilts market is anything but good news for people at or approaching retirement.

The problem is that the extra demand for gilts has pushed their price up and further reduced the yield they pay. And with the income paid by pension annuities rising and falling in line with gilt yields, people on the brink of retirement and ready to exchange their pension fund for an annuity have some serious decisions to make.

Annuity rates have halved in the past decade or so, with disastrous repercussions for millions. In the past three years alone the average rate for a man retiring at 65 has plunged from 7.85 per cent to 5.95 per cent, according to Hargreaves Lansdown. So a 65-year-old man buying an annuity with a £100,000 pension pot would typically get £5,950 a year now, compared with £7,850 in 2008.

This dramatic decline has persuaded more retirees to keep their fund invested and instead take income from it when they need it, using drawdown arrangements. But for the vast majority of people, annuities remain the only real option.

If you’re retiring now it may be worth phasing your annuity purchase – buying it in instalments. And shop around for your annuity so you can be sure of getting the best deal.

And last but not least, make a fuss about any illness or health condition you may have. As explained in the main feature on these pages, millions of people fail to apply for enhanced annuities for which they may be eligible, missing out on potentially thousands of pounds of income in the process – a loss that pensioners can ill afford in the current climate.