Over the course of the last 24 hours there have been a number of positive developments for BSPS members.
- The deadline for decisions taken in “time to choose” has been taken back to 22nd December for all members (previously this had only applied to a handful of special cases)
- The CETV quotes issued to date will be honoured by trustees till 26th January or the end of the 90 day guarantee, whichever is the later.
- One of the SIPP Providers – Momentum – that took money from Active Wealth Management has made a number of timely interventions to protect member’s wealth from damage.
Taken together, these developments should go some way to ease the growing sense of disquiet among steelworkers and particularly those worried by the closure of Active Wealth Management (AWM) to new clients
The FCA’s restraining order on AWM, goes further. Darren Reynolds – who runs AWM is not allowed to continue advising his clients. Almost at the close of the week’s business, the FT broke further news.
BREAKING: ACTIVE WEALTH UK is to choose a third-party IFA to continue serving British Steel transfer business in train.
Active Wealth UK this week stopped transfer advice business after FCA intervention.
FCA says it won’t choose third-party IFA. pic.twitter.com/4SySz6P54L
— Josephine Cumbo (@JosephineCumbo) December 1, 2017
Fox in charge of coup
I have written to the FCA, suggesting that it reconsider its position and actively involve itself in the selection of a third party IFA.
The scale of the AWM transfer portfolio has yet to be revealed. However we know that there around 100 CETVs that have been paid to Momentum through AWM and Momentum is only one of the destination. If average CETVs are £350,000, then the FT’s estimate that AWM’s BSPS assets under advice (£25m) looks low.
To ask Darren Reynolds – who is barred from advising this portfolio – to appoint the “third party IFA” is akin to putting the fox in charge of the chicken coup.
Were the Pensions Regulator involved, either Pi , Dalriada or similar would have been appointed to restore order.
The surveys we have seen which looked specifically at BSPS decision making make it clear that steelworkers are not liberating their pension to manage their money themselves, they are appointing IFAs instead of their pension trustees as their fiduciaries.
What is clear is that less than 4% of those who responded – wanted to manage their own money , 82.6% said they wanted to “take their pot and let their IFA manage it“.
Put another way, these decisions aren’t about pension freedom, they are about another style of control. Members are swapping trustees for IFAs.
This should be deeply worrying to the FCA, for while Trustees – especially of schemes such as BSPS, are few and accountable, IFAs are numerous and are far less easy to regulate. The failures of trust documented on this blog, suggest Active Wealth Management abused the trust of BSPS members as did its lead generator and most likely those downstream offering wrapper, asset management and fund administration.
The vulnerable people I and Al (and now Jo Cumbo) have spoken to, had every reason to trust AWM. It was fronted by Celtic Wealth, a local firm which was (until this week) endorsed by a Welsh rugby hero (Shane Williams). Celtic Wealth did not lavish hospitality (chicken in a basket) but offered a service at a reasonable price (£1500) which promised steelworkers the keys to unimaginable sums of money and removed control of that money from Tata UK, on whom the Steelworkers feat they were overly-dependant.
Any implication that those who signed up with Celtic and then AWM were being stupid , should consider the degree of trust steelworkers have in local IFAs. The members we spoke to repeated what they had been told by IFAs about the FCA, guarantees, expected returns and most of all about the viability of the adviser’s plan to more than meet the expectations they could have of BSPS2 and the PPF.
They took this on trust and they were not being stupid. Who else was there for them to turn to? Those local IFAs who have spoken to who have behaved impeccably, (Ray Adams of Niche and Matt Richards of Aspire for instance) have had to turn away business to manage the clients they have taken on properly.
It took Al Rush and some local experts to point out that the majority of advice given was a pack of lies.
“Victim” is not too strong a word.
I came across a member yesterday who had removed his investment from Vega Algorithms and now sits with the Momentum SIPP in cash, the excursion had cost his pension pot £3,000.
The cost of restitution – if it is anything like what we have seen in the past – will put considerable financial strain on FSCS, PI insurers and IFAs (if they are not following the example of Bespoke/Celtic or Strand/Vegas).
But the biggest cost will be to the members, who are even now enduring considerable uncertainty. We know exactly where such doubt leads and it is not a healthy place.
That is why I want the Regulator to take stronger action and engage with the local community of IFAs who are (from conversations I have already had) prepared to move mountains to restore some confidence in pensions.
I have written to the FCA and asked that they take immediate steps to reverse the decision to put the fox in charge of the coup and that they divert resource to providing victim support to steel-workers who have been duped.
I am using strong words which no doubt a lawyer would advise me against. But I fear there is not time to argue these matters in the court. The need for help for the victims of poor advice in Port Talbot and elsewhere is immediate and can be focussed on a relatively small number of people.
We pride ourselves in having a regulatory system that protects the most vulnerable. What has and is happening in Port Talbot shames us.
I was very pleased to read this headline and the article behind it.
The words are good. But unless Megan can follow them up with action, they will ring hollow in the valleys.
Addressing the victims of poor advice in Port Talbot must be front and centre of our minds this weekend.
Perhaps someone or group should be going after the creator of this mess in the first place,(I know it would be impossible but it might give someone a fright), the now editor of the Evening Standard.
Hmmm, who do you prefer? Trustees or IFA? It’s like that old advert on the telly that asked a young girl whether she preferred Daddy or Chips?
One of the reasons we are in this pickle is that many trustees choose ridiculously conservative investments like gilts, whilst many good IFAs will recommend spreading a portfolio between maybe four respected and experienced fund managers like Neil Woodford or Robin Geffen.
What I think you would also find is that a good IFA will, after analysis, recommend most steelworkers to go to the PPF. And yes they might have spent £1500 just to be told to follow the default option, but it will have been money well spent as they’ll have peace of mind that an expert looked at their situation and recommended what’s best. Conversely, if an IFA is moving most of their steel clients into a Sipo then one wonders whether that IFA is advising or selling?
Hmmm, which do you prefer, pension or chips? Henry did that chicken in a basket come with chips?
Adrian
“Chose…gilts” ?!? If you are a DB beneficiary, you want your pension in payment covered by the North Korea Stardust Fund?
I am reliably informed that the chicken in a basket came with chips, though I am not suggesting that endorses the outcome
The main issue in restoring confidence in pensions is that the promises made should be honoured or not given. Clearly DB is falsely described as “Gold Standard”
The IFA is mad to take on the commercial risk as the reward is trivial and the outcomes described will suffer selective amnesia on the part of the member when the advice given turns out to be less than the alternative, this applied to leaving the scheme or staying.
Henry has said elsewhere on his blogs that benefits from BSPS 2 and PPF are ‘guaranteed’. For BSPS2 and other DB schemes, the FCA don’t use that language of certainty preferring “safeguarded rights”. Will BSPS 2 put in writing “we guarantee no further dilution of benefits within BSPS 2 in the next 50 years such as the abolition of indexation on pre-97 pension benefits and any further increases of early retirement penalties as witnessed under BSPS 1”? Looks like BSPS 2 will have a strong covenant but there are no ‘guarantees’?
If I’ve used the word “guaranteed” and I am not going to check all my blogs, I will withdraw it. The promise is as strong as the covenant and the covenant of BSPS2 has yet to be assessed. As for the PPF, I would say it was a very strong covenant indeed, The only thing in life that is guaranteed are death and taxes – and that Yeovil Town will win the FA cup this year!
And the FCA wonder why Transfer Suitability Reports are so comprehensive and full of risk warnings…
Megan Butler – she was bussed in to the FCA from the Treasury to stop them being tempted to investigate banks (especially RBS) too closely..
Pension freedoms are the will of parliament…which we elected. Hence difficult to prevent shift to PP, thence cash.
People learn quickly – but sometimes not quickly enough. Pension misselling (1) sparked buy to let. Swap misselling killed SME lending – hence 1/2% base rates – and a dead economy.
How’s Megan going to sort that out?
Not very well by the lack of response from Megan (to date)