Spin, spin and more spin – the Osborne tumble-dryer.


George Osborne’s oral statement that he was introducing a cap on exit penalties imposed on people trying to exercise their pension freedoms is turning out to be a joke, a tumble dryer of spin with nothing but old-rags to be pulled from the tub.


Spin 1.

There is nothing in place to make this happen. The FCA are not about to launch anything- except a consultation on what they should be capping and what the cap might be.


Spin 2

The DWP have not been kept in the loop and it appears the first tPR knew of all this was when they  were approached by journalists.


Spin 3

There is no factual evidence of people being ripped off by providers, only a lot of ill-sentiment from those arriving at retirement because their legacy pensions are not providing the kind of returns estimated at outset.


And bullies special prize…

Budget 2016!

The real issues of what to do with legacy pensions are not addressed by headline grabbing Chancellors looking to warm up the population for the great “savings incentivisation” to come!

George Osborne, if this is the starter, I may be sending the main course back.


A real problem

But let’s be clear, there is a real problem with the outcomes of workplace pensions bought in the 1980s and 1990s. It’s a problem which was partially addressed by Stakeholder’s charge cap and more properly addressed by the RDR, the end of consultancy charging and the imposition of the 0.75% charge cap on workplace pensions.

What goes on above the table is now dealt with, though that is no comfort for those who bought the services of a financial adviser (for the lifetime of the plan) and ended up with massive back end loaded charges and no service whatsoever.

What goes on below the table by way of the hidden costs of pensions (charges to the net asset value of the fund not included in the AMC , dilution levies etc) are not addressed by any current legislation, though we have been promised “charge cap 2” in 2016/17.

The reality of charge cap 2 is that like a lot of Webb’s initiatives, and like the FCA’s April 2015 call for evidence – this work has been mothballed.


Action speaks louder

What we are getting from the Chancellor is rhetoric , what we are getting from Government is initiatives in reverse. Since Martin Wheatley left the FCA and Steve Webb left DWP, we have seen consumerist policies in reverse and the return of the life company and investment association’s lobby. Goodbye Martin Godfrey – hello spin.


The reality is that many people, especially those who did not have the protection of a super-buyer like a caring employer or proper trustees (acting for members of occupational schemes) were sold rubbish products that are now showing rubbish outcomes.

As part of the settlement between the life companies and the OFT (which headed off a full blown referral to the Competition Commission), the life companies agreed to properly review legacy policies and do something when they found malpractice.

Well I have one or two of these policies – a General Portfolio WealthBuilder 226 pension and an Allied Dunbar Personal Retirement Plan, neither of which, 25 years after I stopped contributing, are showing cash-in values as high as the money I paid into them. Presumably there are many people like me. But these policies of mine were invested in managed funds which promised to pay between 8.5% and 13% returns according to the SMPIs (which I still have). If I had received 8.5% pa on my money since 1990, I would have seen my funds treble in value. As well as the annual management charges on the units I purchased , these pots have clearly been ravaged by hidden charges so that they are actually showing a loss.

The policies are in the bottom drawer and clearly they are in the back of Zurich and Reassure (the respective owners of Allied Dunbar and General Portfolio).  Reassure and other Zombie Life companies were set up with no aim other than to manage through to claim books of these shoddy policies, there are others like them.

We hear nothing of what is happening to the pension pots of the customers of firms like Lloyds Life, Trident Life, Merchant Investors, Irish Life, Liberty Life, Target Life of General Portfolio- nor do we hear from the investors, they do not have the capacity to organised themselves.




They deserve more than the shoddy headline-grabbing spin on display this week.

We need the FCA to show its teeth and get to work to ensure that wherever the money within this vast legacy book is, it is properly accounted for and looked into. That’s what the ABI have been supposed to be doing and if we don’t have proper answers from this legacy review, then we need the Government to take charge and ensure that when people come to take their benefits, the transfer values reflect some value for the money the investors have paid in.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Spin, spin and more spin – the Osborne tumble-dryer.

  1. Michelle Cracknell says:

    Product design on pensions in the 80s and 90s is something that the industry should be ashamed of – it was smoke and mirrors BUT that does not mean that exit charges are unfair.

    Frontier Economics did excellent work for the IPB on legacy charges. This report has the facts about charges. ABI has audited exit charges. Page 58 in this report.

    If exit charges are capped, we will create a landscape where people are disincentivised to keep their contract in force. A very dangerous world.

    • Anthony Filbin says:

      If exit charges are capped we will create a landscape where people are incentivised to get better value for money.
      This is only a dangerous world for Insurance Companies not putting their customers first

      • henry tapper says:

        This seems a very reasonable argument , all we need now is for people to be a little more savvy with their money – I guess that’s where Michelle comes in!

  2. henry tapper says:

    ABI have audited exit charges- for once I can’t agree with you Michelle- any ABI document that claims to audit its members cannot be trusted.

    It’s been a long time since the ABI’s legacy enquiry set out and all we’ve seen since it commenced is rhubarb.

    I think Government has just got tired with them- the insurers should have been referred to the competition committee following the OFT report rather than be relied on to put their house in order!

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