Platform and SIPP provider AJ Bell saw pre-tax profit rise by 33% to £37.7m in the year ended in September, the company reported today.
The firm has set out a series of proposals designed it says would “radically simplify” the rules savers are required to navigate.
AJ Bell’s ‘manifesto’ includes:
ISAs
· ISAs, which have become popular with investors partly because of their simplicity, are under threat from the same creeping complexity that has suffocated pensions
· We now have at least six different types of ISA, each with different rules and restrictions people need to understand
· The next Government should return the ISA to its simpler roots by creating One ISA incorporating the main features of the existing framework
· This would include a 25% bonus on the first £4,000 of savings where the money is used to pay towards a first home, payable on completion
Pensions
· The next Government, whoever it may be, needs to address mounting complexity which risks putting an entire generation off saving for their future
· In the short-term the annual allowance taper needs to be scrapped to ease strains on the NHS
· This should trigger a longer-term, independent review of pension tax rules aimed at simplifying the system and encouraging more people to save for retirement
· The unfair and poorly understood money purchase annual allowance (MPAA) should also be ditched as part of this review. If necessary, the annual allowance could be lowered to compensate for any lost revenue to the Treasury
· In addition, policymakers should aim to simplify the overall tax structure by moving to a single annual allowance for defined contribution (DC) pensions and a lifetime allowance for defined benefit (DB) pensions
· Pension death benefits should be formally excluded from the Inheritance Tax net to remove the situation where pension providers, not the customer have discretion over who receives pension funds when someone dies
Andy Bell, chief executive of AJ Bell, said: “All too often election manifestos focus on short term political point scoring, while the savings gap in the UK continues to widen.
“This is one of the biggest challenges our society faces and the next Government will have a huge opportunity to make life a lot simpler for people trying to do the right thing and save for their future.
“Pension reforms in 2006 were supposed to usher a new era of simplification for pensions, but since then politicians have repeatedly tinkered with the rules to the point even an actuary would struggle to make sense of some of them.
“No sensible person would create a pension system from scratch with three different annual allowances, a lifetime allowance and no fewer than seven lifetime allowance ‘protections’.
“Now automatic enrolment has been fully introduced, focus needs to turn to engaging more people to save for their own futures.
“Creating a more straightforward tax system which people understand is a necessary condition for building greater levels of trust in pensions.
“ISAs have similarly morphed from simple beginnings to become increasingly difficult for investors to understand.
“Incorporating the best features of the current ISA system in One ISA, including the bonus for first home purchase, while removing the unnecessary complexity we know puts people off would make life easier for millions of people.
“Furthermore, new investors could be better encouraged to save for their future in a system they can more easily understand.”
SIPP and platform operator AJ Bell is likely to be valued at between £626m and £675m when it floats on the stock market in December, the company predicts.
Major shareholders Invesco Perpetual and chief executive Andy Bell will have an opportunity to sell down their stakes in the business while broadening the firm’s shareholder base.
Invesco currently has a 44 per cent stake which it is expected to sell down to around 25 per cent.
Mr Bell holds 28 per cent of the business and is expected to retain around a quarter.
AJ Bell says the float would enhance its brand, extend its shareholder group, assist in recruitment and incentivisation and help with its growth strategy.
Platform and SIPP provider AJ Bell has called for annual platform charges to be disclosed in pounds and pence.
In its response to the FCA’s Platform Market Study interim report, AJ Bell says that reform of charges disclosure is important to allow greater scrutiny by investors.
The company wants:
- Pounds and pence disclosure of annual platform charges
- Regulatory guidance on bulk platform transfers
- A lifting of the ban on cash rebates
- Improved standards and transparency for model portfolio disclosures
Andy Bell, chief executive at AJ Bell, said: “The platform market has grown to a size and importance that merits greater scrutiny but equally it has delivered significant benefits to consumers in terms of lower charges and greater transparency that shouldn’t be derailed by unnecessary intervention.
“In this respect, the interim report hit the right note in terms of highlighting the aspects of the market that need further debate.”
“The FCA is absolutely right to put value for money front and centre of the platform market study and sharpen the focus on revenue margin, expressed as the amount of revenue each platform makes in a year from each £ of assets under administration (AUA).”
He said that revenue per £ of AUA “cuts through” the complexity created by different platform charging structures.
He wants to see investors given the level of charges each platform levies per £ invested.
This would be disclosed as £s of revenue per £100,000 of investment, rather than a basis points measure.
He said that based on the 2016 numbers from the interim report platform fees per £100,000 would range from £220 per year to £540.
Mr Bell said he would also like to see platforms provide a calculator on their websites that showed customers the annual charges that potential and existing customers will pay, in pounds and pence.
He also wants to see switching between platforms made easier.
In addition, he called for the lifting of the ban on cash rebates among other changes to simplify and streamline how platforms run and the charges they levy and to reduce complexity.
The firm reported “strong growth” for the six months ended 31 March, which, as well as increasing profits to record levels, included a 12% rise in customer numbers from 164,557 to 183,482 and a 5% increase in assets under management from £39.8bn to £41.8bn .
Elsewhere in the report highlights included:
· New business growth with net platform inflows of £3.5bn, up 17% (H1 2017: £3.0bn)
· Customer retention of 95%
· Revenue increased 16% to £42.9m (H1 2017: £37.0m)
· An interim dividend payment of 14p per share, a 10% increase compared to the interim dividend last year (H1 2017: 12.75p)
In the period the company launched two new income-focused multi-asset portfolios within its Managed Portfolio Service (MPS) for financial advisers, as well as a new Lifetime ISA.
Preparations for a listing on the London Stock Exchange “later in 2018 or early 2019” were said to be “progressing well.”
Andy Bell, chief executive of AJ Bell, said: “These are the most profitable interim results in our history and are a great endorsement of our strategy and market position.
“The UK retail investment and savings market continues to display strong growth and investment platforms are central to this.”
“We are well placed to continue our growth trajectory and are progressing well with our plans for a premium listing on the London Stock Exchange later this year or early 2019.”