“Transparency” needs to do some work.


I worry the work on transparency is hypothetical – that it lacks practical application – that it has no immediate value to the consumer. But then I think of the conversations I’ve been having with consumers – these past four weeks – I get it.

I will begin quoting advisers debating what the Prufund where many BSPS members are investing their transfer values.

Prufund 1

While advisers debate exactly what Prufund is – and what it can reasonably be expected to deliver – here is another discussion about what BSPS members are actually being told.

Prufund 2

There are already many former BSPS members who have confirmation they are invested in insurance funds. I am seriously concerned about this.


I know a little about Prufund. What I know I have from the Pru IGC chair- Laurence Churchill, to whom I will send a link to this blog. The point of the fund is to provide stability to people who want their long-term investment returns linked to the stock- market and not just cash or gilts. It is invested as a cautious diversified growth fund and the Prudential issue bonuses, which ordinary people think of as dividends or interest.

As such it is a reasonable home for people’s money, provided that they realise that returns are in the long-term linked to what the market offers and that they are not guaranteed. And provided that the gross return is not eroded by charges from intermediaries to a point where people could have done better sticking their money in cash.

Advisory fees

As with Prufund, there is nothing wrong with financial advisers or with paying them a fair day’s wage for a fair day’s work.

But when advisers claim that they are authorised by the regulator to take 2% of an investment that may be worth £1,000,000 for a recommendation (that’s up to £20,000 folks) then the world really has gone mad.

Advisory solutions

When you look through a window, you want to see what is inside. If you can’t see inside you have to take somebody’s word for it. With Prufund, which is a complex product , you have to take the word of an adviser.

The Prudential trust advisers to properly represent their product. I was in the room when al Rush heard that 5.5% number, we heard a number of people talking about the financial solutions they had been offered. When we probed people’s understanding, it was paper thin. They had no idea of what was the other side of the window.

People are trusting in advisers and so are the Pru. This little poll – taken by members on members is  representative of what Al and I found.poll bsps

Not only are people prepared 2% upfront to advisers (on average CETVs of £350k) but they are happy to pay full product charges and pay 1% + for the advice.

I would be happy to pay these costs if I could see they were value for my money, but none of the people we spoke to had the first idea what level of service they would be getting from their adviser , let alone what the total costs of the financial solution were.

The Regulator

No doubt the FCA will be conducting numerous thematic reviews on the advisers who are recommending these solutions at these prices. The question is whether the solutions are appropriate – not to the risk-appetite of the members but to their financial aptitude.

I know from time spent at racetracks and in betting shops, that the appetite for risk of the working man is substantial. This is why there are so many profitable bookmakers. Working men bet on dogs and horses, white collar staff bet on markets, usually to the same effect.

In my view, any thematic review needs to start not with the adviser – who will evidence all the right disclosures – but with the customers. If the customers do not understand the nature of what they are buying, disclosure has not happened, advice has not been taken.

My position is that of Al Cunningham
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Put another way: unless someone can get you a GUARANTEED personal arrangement (aka an annuity) worth more than the PPF or BSPS2, think carefully about the risk and potentially lifetime commitment you’re taking on. https://t.co/DDYouvDIpc

— Alistair Cunningham (@Cunningham_UK) November 11, 2017



I now find myself a “Transparency Ambassador” – thank you Andy. That title is meaningless unless you can translate a good idea into action.

That ordinary men are investing their most valuable financial asset – what was their wage for the rest of their life- into products they know nothing about with advisers who they know little about is not “transparency in action”.

Transparency in action is to shine a light on these practices, to broadcast them to the IGCs that run the products into which money is invested – I mean Prudential, Zurich , Royal London and Old Mutual as well as many others that have not been mentioned to me but accept CETVs. It means talking to the IGCs and GAAs of the SIPP providers including Hargreaves Lansdown and AJ Bell. It may mean talking with the Pensions Regulator and the Financial Conduct Authority. It does not mean standing by as the train crashes.

Lessons must be learned

The trauma of “Time to Choose” will lead to a period of reflection, when the lessons of the BSPS consultation with members need to be learned.

We do not know the final numbers, but even the early door statistics are frightening

I BSPS Transfer

I am not frightened that people asked for transfer requests. I am pleased, if they didn’t then they could not have made informed choices. I am not worried about the numbers of transfers made so far, the 700 mentioned and £200m is meaningless. What is happening between now and March 28th (when the last BSPS transfer request can be accepted) is that up to 40,000 people have to make decisions with an advisory population (qualified to advise on these decisions) of only a few thousand.

We saw plenty of evidence of transfer analysis being commoditised through outsourcing, we saw no evidence of members understanding what they got for their advisory fees and we saw frightening examples of misunderstanding about the products used to replace rights under BSPS and its successors.

It is absolutely right that people have a CETV and I do not censure any member for wanting to avoid BSPS2 and PPF and have pension freedoms. That is their legal right.

But it is wrong that we let  people take decisions without the help of good quality advisers – and that is what we appear to be doing.

The lesson that must be learned is that with freedom comes responsibility and we cannot require the responsibility for decision making  to be entirely on pension scheme members.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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6 Responses to “Transparency” needs to do some work.

  1. Isn’t 2% of £1000,000 £20,000?

  2. henry tapper says:

    Thanks Gareth, I’ve corrected my original which got a few laughs from friends on Twitter 20×1 does not equal 10 – even in my hungover brain! Sorry to all early readers.

  3. John Mather says:

    If you look at what was promised to the members and what is now promised to be delivered why is this fundamental misselling not the subject of compensation from the actuaries who so carefully crafted the scheme.

    Why do these schemes continue to mislead by claiming to be the gold standard in the face of the evidence and facts

    Why (like the good IFA) are the sins of the bad ones paid for by the good

    I have said before layer on layer of rules only gum up the system and inhibit innovation increasing the opportunity for the thief and leading to an earlier death of the system as a whole

    The system needs to factor in the mortality of the company and to stop the individual lawyers to these DB schemes earning over £1.5M a year

    Start a campaign there Henry before having a go at the IFA trying to repair at the individual level a failed model

  4. henry tapper says:

    What you are saying John, is what the Pensions Regulator is doing with its Integrated Risk Management program. Whether you can insure insolvency is an interesting question, Ask Con Keating who believes you can and set up Brighton Rock to prove it. The concept has not been tested as we continue to rely on pure funding (and the PPF).

    I have a lot of sympathy with your idea, but there are many people having that debate and very few looking at what is happening to members.

  5. Adrian Boulding says:

    The member’s fund will double in ten years, assuming no withdrawals, if the investments deliver 7%pa after charges, which is maybe 9%pa before charges.

    This is certainly within the bounds of potential outcomes for an equity linked fund, although a long long way beyond median expectations.

    If we made more use of fan charts in helping members understand the future then they could see for themselves that doubling in ten years is possible but unlikely


  6. Mark Meldon says:

    Horse, stable door, bolted!

    Here we go again in a terrifying re-run of the late 1980s/early 1990s.

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