I feel like someone walking to a destination with a blindfold on, I am getting information from my phone but it is intermittent and there are many obstacles that I stumble over as I walk along. Thankfully, there are people watching my progress and warning me to watch my step!
- Yesterday I learned a lot about workplace pensions that I didn’t know. Much is tied up in my blog about what is officially the “TATA Personal Retirement Savings Plan (PRSP)”.
- I learned about the default investment strategy, its composition (55% shares – 45% bonds, equity), its objectives (to help people invest to retirement) and its charges (0.26%).
- I learned that advisers can use this low cost , diversified strategy to help clients achieve good retirement outcomes and be paid for doing so through “adviser charging”. This can even include the cost of transfer advice which is charged “conditional” on the transfer being executed into this Plan.
- I also leaned that the advisers who set up the plan do not offer individual advice but that Aviva allow the transfers to be managed under a separate agency agreement and be paid for at the request of the client from the PRSP pot.
As almost all those still working with Tata are using the PRSP, it would seem the “natural thing to do” to consolidate any transfer taken from BSPS into this plan. But this option does not seem to have been considered by all but a fraction of advisers or BSPS members.
I remain confused – why not? If Tata chose Aviva to run its workplace pension (into which they will pay as much as 10% of workers salaries, one would expect this choice to have been advertised as a good one. Large companies do due diligence, they do not commit large amounts of their and their staff’s wages to a plan that isn’t good – they conduct due diligence.
This due diligence should provide workers with a safe harbour – the first port of call in stormy times. Why has it not been visited by all BSPS deferred members in their “Time to Choose”? I searched the Time to Choose site for information about PRSP but couldn’t find anything. I searched the BSPS Scheme site – no help.
Finally I googled the full fund name and found a website set up to help members with the plan. It contains a webcast with all the details of the PRSP which you can watch here.
Ironically , Aviva told me yesterday that they couldn’t tell me how much PRSP cost, but this information , like everything else I needed to know, is in the public domain! If I go to the dedicated Tata Personal Retirement Plan website and navigate through a lot of linked pages, I can even find a page that tells me my options if I have another pension plan. You can see this page here.
Unbelievably, this website makes no reference to BSPS, whether money from BSPS can be transferred, what the terms of transfer are. It’s only next step is to a contact page
Is this helpful?
Steel workers are thrown back into the same loop – with a link to http://www.unbiased.co.uk which will take them to advisers. There is no responsibility taken by Aviva, or the plan adviser (whoever that is) or indeed Tata – for everything reverts back to unbiased.co.uk.
This PRSP, the primary retirement vehicle for Tata steelworkers going forward is so divorced from the Time to Choose process as if it were a Dutch or American plan, and yet it offers a default investment strategy in a product selected by the employer sponsoring BSPS, BSPS 2 and the employer or former employer of all 133,000 people in their Time to Choose.
I don’t think this is helpful. If I was a member wondering around with a blindfold on, I wouldn’t be feeling anyone wanted to help me.
More stumbling in the dark
As I continue to wonder around with my blindfold on, I come to more information I did not know. Last night I watched the BBC news at 10 to find out that people have been losing hundreds of thousands of pounds by transferring out of BSPS at the wrong time.
Apparantly advisers should have been telling their clients that the transfer values on BSPS were about to rocket up, though I haven’t been able to find out how they could have foreseen this, nor why they actually shot up.
That people accepted one price for their benefits only to find they could have got a couple of hundred thousand pounds for the same benefits a month or two later suggests a failure in the valuation process (as well as a question as to how the lower value could have possibly been worth taking). I don’t intend to go down that route today, as I expect I will get some help from somebody as to what really happened earlier this summer and why transfer values shot up (I said I get a lot of people stopping me stumble).
But the program brought up a word I had not heard mentioned in pension circles for a long time – the C word – Commission.
The regulatory expert Rory Percival picked up from the BBC news piece the use of the word in relation to what was going on at Celtic Wealth and Active Wealth Management.
Poor to see inaccurate @bbc5live reporting that financial advisers receive commissions for advice on pension transfers. Commissions were banned 5 years ago #BSPS
— Rory Percival (@rorypercival) December 5, 2017
Technically I am sure he is right, but Alan Chaplin had a point when he replied.
I had made the same point to the FCA’s Robert Finer at a Transparency Symposium last week.
A major contribution of SIPP platforms to the advisory market is the facilitation of layered contingent charges levied as a % of fees which work no differently than commission.
Put another way, the customer can be led around with blindfold, for all he’s going to see of what he’s getting – and paying.
The charge that dare not speak its name?
If a client signs up to pay an annual fee to an adviser for an indeterminate time, with the onus for cancellation being on the client and the fee being taken as a percentage of funds under advice, that fee is a commission.
Lawyers may argue on a pin, but the charge that dares not speak its name is “commission”.
What every business wants is to amortise the annual value of fee income several years ahead as this gives the shareholder a capital value to the business and a price on which to buy or sell it. Commission does this, it only stops when a client cancels the agreement. We know that clients don’t do that very often, so the practice of embedding advisory fees into products is highly desirable to anyone running an IFA business.
By comparison, the need for advisers to annually request that a fee be taken – the practice that Aviva demand in operating adviser charging – works the other way round. The adviser has to justify his or her fee every year, the fees cannot be amortised and the value of the business is measured against the capacity of the adviser to gain repeat business.
Am I stumbling here into an area where someone can help me? Am I hearing and reading the wrong things, or am I finding myself groping in the dark adjacent to something that might just be called “the truth”?
Is the reason that the TATA GPP is not promoted by Aviva , Tata, BSPS or institutional advisers because they are terrified they might be considered to be giving advice? Is the reason that the TATA GPP is not promoted by advisers because they are terrified of not getting paid? Where are members interests in this? Why is nobody talking about this?
Finally – what does the regulator make of transfer advice to TATA workers looking to transfer BSPS benefits that doesn’t refer to what TATA’s dedicated pension website refers to as “the Company Pension”?
All answers to henry.tapper@pensionplaypen.com or in comments below – thanks!