Had I the heaven’s embroidered cloths,
Enwrought with golden and silver light,
The blue and the dim and the dark cloths
Of night and light and the half-light;
I would spread the cloths under your feet:
But I, being poor, have only my dreams;
I have spread my dreams under your feet;
Tread softly because you tread on my dreams.

W. B. Yeats

Over the second half of the year, a number of  occupational schemes migrate status. Some , like BHS will enter the PPF or at least the PPF’s ante-room.

One or two more will migrate into a Regulatory Apportionment Arrangement (RAA) which you can read about here.

The British Steel Pension Scheme (BSPS), currently sponsored by Tata is well down the road to becoming an RAA, the Hoover Candy scheme has recently been granted permission to move into an RAA.

So members of migrating schemes are faced with choices which present closing windows of opportunity. You do not need to be a behavioural scientist to know the power of the “buy now while stocks last” close.

I was not surprised to read in the FT another highly responsible article on pension transfers from Jo Cumbo , which published this statement from BSPS Trustees.

“The number of transfers completed during the year to March 31 2017 was 482 (the comparative figure for the previous year was 170).”……: “Included within the figure of 482 would be a very small number of current and former senior managers, consistent with the numbers overall.”

Management showing proper restraint

The wording is precise and correct. Trustees are mindful of the Ilford Ruling where the Regulator ruled against well-informed pension scheme members taking advantage of un-reduced transfer values prior to a corporate insolvency sending their scheme into the PPF. This is behind the defensive positioning of scheme and sponsor.

Tata declined to comment. But it is understood that no senior executives involved in talks over separating the pension fund have transferred their pensions. The pension scheme trustees, comprised of both company and member-nominated representatives, also declined to say if any of these representatives had transferred their pensions over the past year.

Schemes that are properly managed and governed

Schemes like BSPS and Hoover Candy operate to a high standard of governance. That standard – we would hope – would be maintained, whatever happened to the member’s benefits.

There is no reason to suppose that the RAAs set up for Hoover Candy and BSPS won’t be run as well as the current schemes. Nor is there any reason to fear the PPF. As I have written recently, there are some members who may – because of personal reasons, be better suited by being in the PPF than an RAA or even the original scheme.

Restraint needed from advisers

I have had some fairly vitriolic comment from some IFAs who point out that it is a no-brainer for members heading for the PPF to “cash out” and take a CETV.

Part of this may be a natural revulsion with the 10% haircut in immediate pension that members take on PPF migration. But John Ralfe is right when he tells the FT

“BSPS has improved its cash transfer values in the last few months, to reflect the scheme’s lower risk investment strategy. The fact that a member transferring now gets more cash, may explain the marked increase in the number of people transferring.”

Infact, the numbers of transfers mentioned by the BSPS Trustees are in line with figures we have seen elsewhere. I do not think they spell out a rush for the door.

There are 126,000 people who have or will have pensions from the BSPS, of them 33,000 are able to cash-out their pensions. 482 is a very small percentage of the potential CETC population.

I have not seen equivalent figures for Hoover Candy or indeed BHS or any of the other schemes in the PPF assessment period. However I would be surprised if there has been a rush to any door.

The more strident wing of the advisory community who consider pension freedoms not only a right but a universal opportunity should also show restraint

Restrained cautioned by employee representatives

I very much liked the comments of Community- the steelworker’s union.

“Steelworkers have already made tough choices necessary to secure the future of their industry, and the ongoing uncertainty about the future of the BSPS is extremely difficult for scheme members.

“All scheme members must be given the choice ….and this must be delivered. “We would urge members to think carefully before making long-term decisions regarding their pension.”

It is hard for those of us in white-collar jobs with the security of a liquid job market to imagine what losing your job in  Port Talbot is like. I remember speaking to a group of Allied Steel and Wire workers in Cardiff in the mid nineties, the loss of their pension on top of the loss of their jobs left them doubly desolated.

Nowadays , available pension security is higher, but insecurity among steel-workers must be high- as Community point out.

It will require great restraint and understanding among financial advisers talking with BSPS members, to remember that however easy we may see for a CETV to add value, it is not going to replace the security of a BSPS, BSPS RAA or a PPF pension.

Indeed, the options available after taking a CETV are all potentially loaded with future insecurity.

“We would urge members to think carefully before making long-term decisions regarding their pension.”

Indeed.

Further reading

The FT article Tata Workers cash in Final Salary Plans can be found here; https://www.ft.com/content/78cfbc0c-46c9-11e7-8519-9f94ee97d996

If you are an IFA and want to consider these issues in greater depth, come to the Great Pension Transfer debate at the East of England Showground near Peterborough on June 19th. The event is free and will attract over 300 IFAs to listen to Rory Percival, Steve Webb, Gregg McClymont, Alan Smith, Michelle Cracknell and many others.  You can still book a free place using this link

Had I the heaven’s embroidered cloths,
Enwrought with golden and silver light,
The blue and the dim and the dark cloths
Of night and light and the half-light;
I would spread the cloths under your feet:
But I, being poor, have only my dreams;
I have spread my dreams under your feet;
Tread softly because you tread on my dreams.

W. B. Yeats

.