That’ll be me on the Boris Bike!

I’m more  excited than ever this morning as later I’ll be cycling up to Broadcasting House to talk on Money Box about the Chancellor’s plans to cap early redemption fees on pensions with Claire Trott and Paul Lewis.

It’s going to be an odd sort of conversation as Claire and I have the same views (both keen to restore pension’s battered reputation) and we both think that George Osborne is rather more keen to restore this nation’s balance sheet (and further his own reputation). So standing up for George – which will be my job- is going to be tough.

A generational issue!

I suppose the  differences between me and Claire is that I am in my fifties and can remember selling pensions in my twenties (the 80s) and thirties (the 90’s). These “fin de siecle pension policies were not pleasant. They would pay salesmen anything up to 100% of the first year’s contributions and the cost of those commissions is coming home to roost today – in early exit penalties – and for those who stay the course – in smaller pots than were originally “projected”.

I’ll explain this word “projected”, because it’s one that many of the people who took out these pensions don’t use. A projection is an estimated of what will happen in the future based on a set of assumptions. “Projected” , in this sense, is not a promise – but an expectation, based on the best endeavours of an actuary.

I think we can forgive those experts 30 or so years ago,for not forecasting near zero interest rates, stock markets that have fallen over the past fifteen years and the failure of all the predicted plagues (AIDS being the most obvious) to slow down improvements in our life expectancy.

But we ought not to forgive (nor forget) that they ignored, in their projections, the impact of the charges within the plans which paid for the commission to the salesmen and for the swanky lifestyles of those who benefited from their sales.

Claire- of tender years – will have grown up with Stakeholder Pension which- though not perfect- did not have the charges of previous types of personal pensions.

This is a generational issue

Talking bout my generation – baby!

Revenge for the downtrodden saver?

So George Osborne’s comments are based in retribution. Those who were sold a golden nest-egg have found that the gold was just foil and the egg is a bit tinny. Rather than run these personal pensions through to retirement, the Chancellor seems to want us to cash them in early – at little penalty to ourselves.

Frankly, given the prospect of dumping my General Portfolio and Allied Dunbar pensions into another policy, I’d do so – if I didn’t have to pay a fat penalty fee in the process.

Anyone who brought pension products from Irish Life, Liberty Life, Trident Life, Merchant Investors, Abbey Life, Target Life or Albany Life would be advised to do the same.

Retribution for those who saved on a false expectation, will be against the present owners of the books of business that have been sold and re-sold. Those owners are now venture capitalists and shareholders who own companies like Reassure, Deutsche Bank ,Lloyds Bank and Resolution. If these financial behemoths are expecting to earn out in full on the charges within our pension policies, then they may be disappointed.

Why savers deserve to be let off these charges

Katie Morley and the Telegraph have led the campaign to get people now in their fifties and sixties who bought these policies back in the day, a fair transfer value or the right to pension freedoms on “fair” terms.

I’d support them because I don’t think the original contracts that people bought into- have been honoured. The idea behind those massive commissions paid up front was to pre-fund a lifetime of advice from the Financial Advisor”. Most advisors were seen at the point of sale and never seen again. I’m one of the few still working in the same job (more or less) but even I have not done my job and kept in touch with those people I sold to.

As well as the initial commission, advisers got ongoing commission known as “renewal”, this was supposed to reward advisers for keeping policyholders in the same policy. You might get 2.5% of a year’s contribution as renewal commission. Unfortunately, once the policyholder had paid a couple of years contributions to the old policy, the 2.5% was small beer compared to what could be made by getting them to start a new policy. This practice of “churning” policies every two years meant that some people had to pay not once, but several times for a lifetime of advice (they never got).

“Advisers” – phoney sales agents for the providers!

The Life companies have and still argue that the people who should be paying for this breach of contact are the advisers. But the advisers are long gone. What money they made has been spent or never earned (the firms in which they worked rooked the worker ants as badly as those ants rooked their customers).

But the Life Companies cannot wash their hands of the problem. They were supposed to oversee what went on. Instead they encouraged the worst kind of practices and hid behind the false concept of “independent financial advice”. In those years there was nothing independent about advice. The meetings between advisers and life company “Inspectors” started with a discussion around improving commission levels and ended in the wine bar.

Until now some 2.2 million savers faced early exit fees to access their pots under the new pension freedoms, with 870,000 over-55s facing a penalty of £1,000 more for accessing their funds and 62,000 savers facing extreme charges of 40pc or more.- the Daily Telegraph

The Telegraph don’t stop there. their campaign is about greater fairness for those reaching 55 so that they can use the money they have saved for retirement as suits them, not the financial institutions they’ve saved with.

Here are their five demands

I can and do to sign up to them!

So wish Claire and I good luck on the radio! May the best man or woman win- though I suspect you should mark your coupon a “score draw” (3 points)!

you’ve got to start somewhere