Position statements
Below are some of Scottish Widows' views on key issues facing our industry at present
Distribution Review
Solvency II
Personal Accounts
FSA Distribution Review
The FSA has instigated a review of the retail distribution market. Their desired outcomes are
- An industry that engages with consumers in a way that delivers more clarity for them on products and services
- A market which allows more consumers to have their needs and wants addressed
- Standards of professionalism that inspire consumer confidence and build trust
- Remuneration arrangements that allow competitive forces to work in favour of consumers
Discussion continues on the specific proposals, and how best the industry can mee these demands. Scottish Widows view is that our industry needs a vibrant advice community providing consumers with access to appropriate advice based on their needs and service requirements. This must be done on an economically viable basis for all parties where there are clear responsibilities for all recipients.
Solvency II
Solvency II is the proposed change to the framework that governs insurance companies in the European Union. The primary objective of Solvency II is to strengthen policyholder protection by aligning capital requirements more closely with the risk profile of the company. The likely outcome appears to be a risk sensitive approach with many areas looking similar to the current UK ICA principles, but with provisions increased to allow for a cost of capital. The rules won't take affect until 2012 but the European Commission has issued a dradt Solvency II framework directive, which outlines the general principles.
Scottish Widows sits on the Treasury's high level forum on Solvency 2, and has also been attending meetings of the FSA Insurance Standing Group. We are supporting HMT efforts to build up a realisitic risk based system, such as that already in place in the UK.
Personal Accounts
Following the Pensions Act 2006, the Government has introduced separate legislation to implement Personal Accounts. These are the private savings element of the curret pension reform package and will see the introduction of automatic enrolment into a new central scheme from 2012. Personal Accounts will widen access to pensions savings for around 4-5 million workers currently not inoccupational schemes (some thinkup to 10 million). It is proposed to have minimum contributions levels of 8%. The PA Bill is likely to be enacted towards the end of 2008. Paul Myners has been appointed as a chairman of the Personal Accounts Delivery Authority, with Jeannie Drake (formerly part of Adair Turner's Pensions Commission) as a director and Tim Jones, former Chief Executive of Retail Banking as NatWest and co-director of the Centre for the Study of Financial Innovation as Chief Executive.
Scottish Widows strongly recognise the need for overarching reform of the UK Pensions system to meet the challenges of changing lifestyles, behaviours and demographic change. Scottish Widows has been closely engaged with ministers and civil servants throughout these discussions, with a view to ensuring a positive outcome for all concerned. We are encouraged by evidence that the Government is committed to preserving the current market, including its work to allow auto-enrolment into contract-based pensions. We believe PA charges must be sufficient to remove the need for government subsidy, and the shape should include a contribution charge in addition to an annual management charge.
