A common theme in my blogs is the frustration that people get stuck in the wrong kind of investments wrong in terms of charges, wrong in terms of management and wrong in terms of the suitability of the fund to a person’s needs.
Nowhere is this more prevalent than in defined contribution pensions where the decisions taken years back by an individual or a fiduciary or most likely by an adviser, right as they seemed at the time were wrong then or right then and wrong now.
I look at lists of members of GPPs who are invested in funds that they should never have been in and I want them out into the bright sunny uplands of today’s cheap and efficient products – and there is nothing I can do – like I said – frustrating.
But worse is when I look at a single life policy owned by a group of trustees on behalf of members. The policy is typically invested in one of a number of series of with-profits funds created by the insurer in the heyday of with-profits, the 80s and 90s. I see the dismal return on these funds, the management fees eroding the dismal returns still further and I want them out.
And I can move this money, well I can with the permission of the scheme actuary with the appropriate certificate. I can move this money to the sunny uplands if I can get the scheme actuary to sign off that this is worth doing. Which it almost certainly is.
Ah – “almost” – there is a risk, there is value at risk – there is the risk that by moving the money, one or maybe a few will be worse off than had they stayed. The risk usually surrounds guarantees.
This is where the pension mis-selling crisis has taken us, this is where the abuse of the Equitable Life‘s mutual policyholders has led us. No more can I as a trustee exercise my proper right to switch money from the fetid swamp of legacy with-profits to the sunny uplands of a lightly charged tracker. No more can I as an adviser sanction such a switch.
We must sit tight , in the knowledge that because we have insufficient knowledge, PI insurers and heavy handed regulation, we cannot do the right thing for the 99% for fear of doing the wrong thing for the 1%. For the fee we charge cannot be set against the cost of litigation from the 1%, no matter how remote that cost. Because we cannot risk our reputation, our actuarial certificate and the livelihoods we have and we create for those who work for us.
So it is that the money still sits where it shouldn’t , making inadequate pensions the more inadequate, making the managers of the money obscene money for the work they do not do for it and making me drive home from work swearing obscenities at a system that has become so obsessed with the minimization of risk, that it has forgotten what it was there for in the first place.
If you have read this and know what I am talking about, make a comment or drop me a line at firstname.lastname@example.org . I’m no saint but I don’t want to be an enforced sinner! I would like to find a way to help my clients to the sunny uplands and hey! – if you’re a regulator…. can we talk?
- Too important to hide;- why the Government has to investigate pension default charges (henrytapper.com)
- Send in forensic actuaries to sort out these “rip-off” pensions! (henrytapper.com)
- “The first cut is the cheapest” – transferring legacy pensions (henrytapper.com)
- “The Employer’s Duty” (henrytapper.com)
- City Comment: Here’s how to solve pension problem, Ed (standard.co.uk)
- The Corporate Pension Plan (moneymanager.com)
- Savvy punters will drive down pension charges. (henrytapper.com)