What the City’s ‘Big Bang 2.0’ means for your money

Hunt - Kin Cheung/AP
Hunt - Kin Cheung/AP

Chancellor Jeremy Hunt has unveiled new proposals today that will tear up “overbearing” EU legislation, in a move that the Government hopes will boost the British financial services industry.

Mr Hunt has targeted old European rules ranging from pensions to investment funds – The Telegraph breaks down how the proposals could affect you and your savings.

Buying investment funds could get easier

European “Priip” rules were designed to help savers understand investments sold by fund houses, wealth managers and banks, laying out specific “fact sheet” formats to explain their key characteristics. But critics have argued that the rules were so prescriptive that often they were unhelpful, or worse misleading.

The Government has opened a consultation on this topic, so nothing has been confirmed yet. But experts suggest that DIY investors can expect changes to the way funds are marketed soon.

Credit cards and loans

The Government is trying to make it easier for savers to access safe credit cards and personal loans.

It wants to reform credit regulations that have been in place since the 1970s, and help bring the industry into the 21st century.

The rules currently pre-date most of Britain’s financial services rules, so newer products such as “buy-now-pay-later” are not fully regulated.

It hopes that its reforms will help innovation in the credit industry, improve accessibility and help the economy grow. The changes have not been confirmed yet, but the consultation is even looking for suggestions on how to make loans easier to access for green home improvements, such as solar panels and heat pumps.

Your workplace pension

The Government wants to speed up the consolidation of “defined contribution” pension schemes. This includes most workplace pensions, which invest your savings on your behalf over the course of your career.

Ministers have already made several efforts to encourage such “DC” schemes to consolidate as it believes scale would allow them to be better value for savers and ultimately better retirement outcomes for workers.

Tom Selby, of the broker AJ Bell, said: “While schemes of all sizes can deliver poor value for members if they are poorly managed, these risks are exacerbated where the scheme simply isn’t big enough to administer funds at a low cost.”

Over the long term, this could mean that the company managing your workplace pension could change.

Pension fees could be changing too. Under current rules, most savers should not pay more than 0.75pc in fees from their pension. But the Government is also planning regulations for early next year that will remove “well-designed” performance fees from the cap on pension charges.

The move was designed to help pension funds invest in illiquid British assets to help the Government’s levelling up agenda.

But it could trickle down as higher pension costs, as these assets are more expensive for pension funds to manage.

Payments and cryptocurrencies

Payment account rules are also under the spotlight. The Government wants to reform rules that are designed to help improve the transparency and comparability of fee information on payment accounts, such as current accounts, and help people switch providers.

Policymakers believe that current requirements are either too prescriptive or unnecessary.  The Government has opened up a call for suggestions from the industry, so there could be changes to the way that you shop for a new current account soon.

It is also keeping an eye on digital currencies. Despite a crypto crash this year, the Government has reiterated its commitment to “emerging areas of finance” and wants to bring crypto assets into regulation. It is also currently discussing a digital currency with the Bank of England, and is considering rules that could make it easier for investment managers to buy cryptocurrencies on behalf of some of their clients overseas.

Making financial advice cheaper

Ministers are working with the City watchdog to make it easier for savers to get professional financial guidance.

Currently, rules around what constitutes financial advice are very strict and costs are too high for the average saver. The industry wants to make it easier for big financial businesses to provide “guidance” to people at a lower cost, which should help savers invest for the first time.

The Financial Conduct Authority is currently collecting evidence on this and is aiming to implement regulatory changes before the end of March 2024.

However Holly Mackay, of the consultancy Boring Money, warned that bringing “financial guidance” under regulation could open up a can of worms. She noted that the watchdog may need to monitor social media posts about finance more closely.

“We have seen the likes of Matt Damon and Kim Kardashian discussing investments on social media, which is crazy,” she said. “We need to set boundaries online. We have the blue tick on social media now, but perhaps we need a second one to show which users have accreditations.”