President Donald Trump takes office
As if there wasn’t enough political uncertainty in 2016, 2017 is set to offer up another 12 rollercoaster months. First up is Donald Trump’s inauguration on 20 January. Uncertainty about how Trump will govern will abate in the new year, but the steadiness of markets will depend upon the steadiness of Trump’s hand on the tiller.
NS&I offers savers some good news
Government-owned National Savings and Investments (NS&I) launches a three-year savings bond, offering a 2.2% interest rate. Open to anyone aged 16 or over, savers can make a minimum investment of £100 and a maximum of £3,000.
The SMCR broadens its reach on boosting individual accountability
The Senior Managers and Certification Regime (SMCR) calls for all certified individuals to be assessed as ‘fit and proper’ by March 2017. The regime’s high-level conduct rules will also apply to nearly all staff (bar ancillary staff) by this date.
In 2018 the SMCR will be extended to apply to all firms authorised under the Financial Services and Markets Act 2000. The FCA intends to consult on rolling out this extension in 2017.
Elections in Hong Kong and France
Hong Kong elects a new Chief Executive in March. Pro-democracy protesters could be on the move again if they perceive the elections, overseen by Beijing, to be undemocratic. Jitters on the Asian markets are likely to spread west. Europe will wait to see if Marine Le Pen, leader of the far right Front National, takes the Élysée Palace. A political upset like that could see France taking a more protectionist approach to issues such as trade and employment, putting the European project at greater risk.
Britain triggers Article 50
UK Prime Minister Theresa May has pledged to trigger Article 50 to begin Brexit negotiations with the EU in March. Investors will enter a two-year period of uncertainty while they await the outcome.
Enhanced ISA options for savers
The £15,240 annual ISA allowance will rise to £20,000. In addition, a new Lifetime ISA (or LISA) will come onto the market to help the under 40s save for their first home or for retirement. LISA savers, who have to be 18 to 40 when they open the account, can save up to £4,000 a year and, at the end of each tax year, will receive a state bonus of 25% of what they have saved that year. The bonus will be paid until the saver reaches 50.
More generous inheritance tax (IHT) rules come into force
April sees the introduction of the new IHT Residence Nil Rate Band (RNRB), which will allow individuals to pass on up to an additional £175,000 of the value of their main residence, as long as it goes to direct descendants. The new allowance will be phased in over four years, starting with a £100,000 allowance in 2017/18.
Landlords lose higher rate tax relief
Buy-to-let landlords who are higher or top rate taxpayers have traditionally received tax relief of 40% and 45% respectively. From April, this starts to get phased out over a four-year period, to be replaced with a flat rate of 20%.
Apprenticeship levy hits firms with a £3m-plus pay bill
On 6 April 2017 the UK Government’s apprenticeship levy will come into force. This requires all firms operating in the UK, and with a wage bill of more than £3m, to invest in apprenticeships by contributing to a central funding pot. The levy is 0.5% of a firm’s total pay bill, minus a £15,000 allowance.
Mandatory Gender Pay Gap Reporting – preparations should start this year
Another set of rules due to come into force on 6 April 2017 is the Equality Act 2010 (Gender Pay Gap Information) regulations. They will require all private and voluntary sector employers with more than 250 employees to publish information about the gender pay gap in their organisations.
Results of the first gender pay gap analyses are due to be published in April 2018 and will cover the period from May 2016 to April 2017. That means firms should begin collecting data from April 2016 and should start to carry out their calculations from April 2017.
Iranians vote for a new president on 19 May. If reforming incumbent Hassan Rouhani fails to get re-elected, his deal with the UN and EU to curb Tehran’s nuclear ambitions in exchange for the lifting of economic sanctions could be under threat. Hardliners in Tehran are opposed to Rouhani’s reforms and if they take back control, it could lead to a re-imposition of sanctions.
Fourth Anti-Money Laundering Directive triggers AML training review
The fourth EU Anti-Money Laundering Directive will be implemented in all EU member states by 26 June 2017. This brings in new customer due diligence checking requirements and new obligations to maintain a record of payments and report suspicious transactions, among other measures. Anti-money laundering training is a legal requirement for all financial services firms. Changes to the law should trigger reviews of existing training provision and the need for refresher training courses.
MiFID II brings more companies and products into its net
MiFID II will expand the scope of the original Markets in Financial Instruments Directive to cover a greater number of companies and products, and include fewer exemptions. Member states must adopt measures to transpose the revised directive, which takes effect from January 2018, into domestic law by July 2017. During 2017, financial services firms will need to dedicate significant resources to prepare for MiFID II. Preparations will need to include extensive training programmes to ensure employees are familiar with the changes and their potential impact.
Uncertainty about how Trump will govern will abate in the new year
Regulation on KIDs and PRIIPs
The Packaged Retail Investment and Insurance-based Investment Products (PRIIPs) regulation introduces a standardised fact sheet, also known as a Key Information Document (KID), which is designed to present the main features of an investment product in a simple and accessible manner. A regulatory framework should be in place in the first half of 2017 and apply as of the beginning of 2018.
German election tests Merkel’s popularity
Although Angela Merkel is still on course to be re-elected, anger over her handling of the European migrant crisis means she can’t take victory for granted. As in France, a more inward-looking German Chancellor could further threaten the EU.
GDPR could be costly for firms
The General Data Protection Regulation (GDPR) intends to strengthen and unify data protection for individuals within the European Union. The most significant change is the need to obtain freely-given and auditable customer consent for the processing of personal data. Firms could be fined up to 4% of global turnover for non-compliance. The rules were adopted in April 2016 and come into effect on 25 May 2018. Firms will need to start getting to grips with the new requirements during 2017.
This article was originally published in the January print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.