For all the noise-news from BSPS is good!

Yesterday saw a number of documents published and statements made, confirming  findings in Port Talbot but leaving many questions unanswered.

But for all the noise, news published at the end of this blog is good- very good – it should make us  breathe a sigh of relief and earns BSPS Trustees, my congratulations.

port talbot 4

Port Talbot and the Tai Bach Rugby Club (in red)

We’re learning that what we suspected was true

At first sight, the letters and statements appearing on the Work and Pension Select Committees’ website, are useful in confirming what amateurs had already discovered

We learn that Celtic Wealth Management had a large number of introducers within the Port Talbot Steel Works and that it earned £700 a lead for work passed to Active Wealth Management.

We learn that Active Wealth Management advised on around £40m of BSPS Transfers, that the average CETV advised on was £400k and the largest twice that. Anything between 90 and 100% of transfers were arranged on a contingent basis and the upfront advisory fee charged by Active was £1500.

We learn that there is an 8th firm that has closed its doors to transfers as a result of the FCA’s review.

In a further statement from the FCA published yesterday (but not own the BSPS website) it is reported that the FCA are looking to extend its activities to probe all transfers and that 45 further firms will be subject to investigation.

What is clear from Frank Field’s statements on the W&P website is that he is far from satisfied , either by the letters from Celtic and Active Wealth or by the responses of the FCA.

The responses raise a series of further questions about the FCA’s actions in regard to the BSPS, which the Committee will be pressing them further on:

FCA intervention in British Steel Pension Scheme

The timeline of FCA intervention in the BSPS saga, including specifically in relation to Active Wealth.

Although it is apparent Active Wealth  was already on their radar, the FCA first contacted the firm about the BSPS specifically in November 2017 – two months after BBC investigators presented it with evidence they had uncovered on Active Wealth and Celtic Wealth.

The FCA had requested case files and outlines of business processes from Active Wealth between August 2016 and February 2017, leading to a visit by the FCA in July 2017. As a result, Active Wealth’s director Darren Reynolds agreed not to recommend any “non-standard assets” to clients. It is unclear whether this means that Active Wealth had been recommending “non-standard assets” to pension transfer clients before July 2017.

The FCA finally required Active Wealth to cease advising on new pension business 14 months after it first started digging, and just weeks before the original deadline for BSPS members to make a decision on their pension.

Active Wealth’s reductions for early retirement

The description by Active Wealth of the Scheme’s reductions for early retirement as “taking a penalty” and “suffering a penalty” raises the question of whether they were using this pejorative characterisation of what is actually simply an actuarial calculation in their advice to clients.

Size of transfers and fees

Questions remain over the actual size of transfers handled and fees received for them. The highest transfer value that Active Wealth handled in respect of BSPS clients was £790,404 and the average was £398,347  – representing upwards of £40 million transferred out of BSPS on their advice alone.

Active Wealth state they advised over 300 clients on BSPS transfers, “around a third” of whom acted on that advice to transfer out. Their director Darren Reynolds failed to answer the specific question of how many in total of those 300 plus individual pension savers were advised to transfer out of the “gold-plated” scheme.

The highest and average fees paid to them so far described as £1,500 and £1,443 respectively. The fees seem very small relative to the huge transfer values and it is unclear how many BSPS clients signed up to an ongoing adviser charge or what that might cost them ultimately in total.

Field concludes

“I have already described the FCA’s action on BSPS as grossly inadequate, and these responses do nothing to increase my estimation.

The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate. From their intervention in this affair it seems clear that the FCA’s actions still effectively protect these businesses’ ability to make money out of pension funds, rather than protecting pension savers. They must take care they are not sleepwalking into yet another huge misselling scandal.”

What we aren’t learning

Nothing above is new, the dribble of firms voluntarily resigning their capacity to transfer extends, the tone of the FCA’s (unpublished) statement , is considerably more robust, but such developments are to be expected.

We still have no idea why Darren Reynolds and Active Wealth Management chose to invest money into 5Alpha, via Vega Algorithms’ DFM, why he was charging so much below the market rate for transfers and nothing at all for ongoing advice. We don’t know why the redemption values offered to Vega/5Alpha investors are so much lower than the amounts invested. We don’t know which classes of 5Alpha shares were purchased (or why) and we have no idea whether the marketing fees that 5Alpha can pay, were paid.

5Alpha , confusingly – has been removed from the Newscape website. Fortunately , I have a copy of the “supplement” prospectus, from which this extract is taken

If investors want an update on the progress of its plan since inception, they can use Bloomberg (5Alpha is represented by the orange line and is compared to the global equity index (red) and FTSE 100 (blue).



On the face of it, Darren Reynolds undercut the advisory market while investing members in funds that were to put it mildly – obscure. The fund has already built up a formidable history of under-performance. Ultra Conservative maybe – but hardly living up to its billing.newscape bloomberg

If we can accept that AWM and Celtic did not take these distribution fees, we must assume they have not been paid. Hopefully this will be reflected in the full return of monies invested through Vega (by Gallium).

Reynolds’ letter goes at length to reassure the Committee that he uses the most sophisticated risk management techniques, which…

 involves looking at the strategy and track record of the fund manager and the funds under consideration, and to analyse a range of metrics, including common measures of volatility, such as standard deviation, and of risk-adjusted returns, such as the Sharpe ratio. We also consider Sortino which is a variation of the Sharpe ratio which distinguishes downside volatility from overall volatility. It uses an investment’s standard deviation of negative returns, often referred to as downside deviation or semivariance

yet the fund into which Vega’s DFM invests – 5Alpha was seeded from Strand Capital, a fund that is currently in special administration. The performance of Strand and 5Alphas is right at the bottom of its sectors and the costs that are incurred in the management of the Vega DFM , the fund and sub funds it invests in , not to mention the fees charged by Gallium , the SIPP providers and Vega itself, make an investment into 5Alpha a total nonsense.

What possible reason had AWM (and others) for investing client monies in Vega?

We now know that Active Wealth Management has been under the FCA’s surveillance from August 2016, we know that Strand Capital has been in special administration since May 2017. It really is time that we started to make sense of why AWM were investing as they were, why most SIPPs refused to have anything to do with Strand, Vega , Newscape of 5Alpha and why AWM were not charging the market rate for what they did.

Put another way, if AWM were paying Celtic Wealth Management £700 per case, and only charging the client £1500, how could Darren Reynolds afford to do business?

Would it not have made more sense for AWM to have simply used the TATA Steel workplace pension , at a fraction of the cost , with a guided pathway and at no regulatory risk ?

Finally some good news

The first cut of numbers suggest that a very high proportion of the BSPS members who made a choice have chosen to move to BSPS2. Some will have deliberately chosen PPF (for better early retirement and tax free cash). Some will not have chosen as they had already transferred. For some the impact of choice would have been so marginal, making a decision was not critical.

And of course some members will have voted more than once – a problem with the lag in communication resulting from using paper.

These numbers are an early indication and the Trustees will be making announcements once a proper audit has been conducted.

But of this,  the Trustees of BSPS have a right to be proud. They have conducted themselves with integrity throughout and look as if they will be rewarded with the confidence of the general membership.

I stated in a recent article that the trustees had lost the confidence of members and these figures who that I was wrong – or only partially right!  What I saw in Port Talbot was not representative of the total membership, the disaffection with BSPS – was not a disaffection with the Trustees, but broadly with TATA.

I am very happy that such a high proportion of BSPS members have taken good decisions and congratulate the trustees and management of BSPS for what is looking like a result.

Nonetheless, there are lessons to be learned from the Facebook pages of the members and Frank Field’s comment that the trustees were  in “another country” (I had previously remembered “a different world”) is justified – at least in terms of what happened in Port Talbot.

Lest the Trustees become complacent, they should consider that many who have yet to complete their transfer, have elected to join the new BSPS, in case the CETV is never actioned.

From what I am reading on the pages, there is still considerable anxiety that pipeline transfer applications will not be submitted by the administrative deadline of February 16th and that many CETVs will not be paid by the RAA cut-out date of March 29th.

Until the very end of the Regulatory Apportionment Arrangement, the Trustees will not know for sure how much of the BSPS fund has transferred away.

Until we have answers to the questions that remain outstanding over AWM, many who have transferred will remain in darkness.

Until we have a rethink of the way that ordinary people are presented with decisions over their pension rights, that enables them to make informed decisions into products with predictable outcomes, we will have more Port Talbots.

Latest estimates are that there are only 3,000 advisers in the UK – qualified to give transfer advice. Mercer estimate that since April 2015 over 200,000 people have elected to transfer.  We can only speculate over the number of CETVs which weren’t taken up.

This suggest that on average, a Pension Transfer Specialist has advised 65 clients to transfer. If we are to believe the FCA’s own research , that only 47% of transfers were suitably advised, then we must see Port Talbot as the  visible tip of a very large iceberg.

Good news for the steelworkers – but the fundamental problem remains



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in BSPS, corporate governance, dc pensions, pensions. Bookmark the permalink.

2 Responses to For all the noise-news from BSPS is good!

  1. John Mather says:

    Delighted that the number of members who moved funds to a poor option were relatively small but as the article concludes

    “the fundamental problem remains”

    That problem is that members were told that their pension promise was gold plated when clearly it was not.

    Advisers who can act responsibly will avoid this area of advice because the commercial risk is too great.

    Only with hindsight can the advice to leave or stay be determined so as I mentioned at the lunch there are few clear cut cases where the probability of being wrong is minimised to the point that the risk could be a viable risk to the PI insurer

  2. Iain PW says:

    I think the number of members electing for BSPS 2 figures are skewed as most members still don’t have the correct numbers for an accurate analysis to be carried out. Members have opted for BSPS 2 in the vain hope the adminstatyors will give them the information they need to make an advised and informed decision prior to 16th February 2018. The administrators and trustees can take zero credit at all. For anyone wanting an accurate analysis of all their options the whole affair has been (and continues to be) shambolic.

Leave a Reply