There are certain events where the police anticipate trouble and turn up in anticipation. There are certain traffic black spots where speed cameras are put in to reduce the risk of accidents and there are some occasions when regulators could see trouble coming.
The question is – was Port Talbot one of them? Rory Percival, who is as on the money about regulatory responsibilities, asks this question.
<blockquoteclass=”twitter-tweet” data-lang=”en”>
Yes, which is exactly why the FCA has been undertaking thematic supervision of DB transfers for a couple of years. But any reason to have specific concerns with BSPS in advance?
— Rory Percival (@rorypercival) January 18, 2018
The integrated risk management framework failed some members of BSPS
Collectively we should stick up our hands and said that in hindsight, the FCA could have been supervising a lot better in Port Talbot than they were.
But let’s ask ourselves what would have needed to happen to trigger their earlier arrival.
- The Trustees of the scheme could have called in the FCA – as a football club could ask for extra police after conducting a risk-assessment of a certain game. I spoke with the Trustees and their advisers in late July about the likelihood of factory gating and the consequences for members.
- Tata, could have provided the Trustees with intelligence of the mood of workers in Port Talbot, this could have come from the unions of perhaps the various lead generators within the works – passing lead generators early intelligence
- Had I had the lines to the FCA which have been cleared for me and others, I could have whistle blown on the risk, certainly other IFAs in the area could have done.
- The Pensions Regulator could – following its detailed discussion with TATA and BSPS, conducted a risk assessment of the RAA as it touched members and shared it with the FCA.
The question for next time is why it took well into November before any intelligence on what was going reached Canary Wharf and why it took Frank Field and the W&P Select, to put this question to Christopher Woollard when he appeared before them later that month.
The answer about the past is for others to deal with. I am sure it will centre around Active Wealth and Celtic Wealth though the scale of pension transfers now emerging from other schemes, suggests that it isn’t just BSPS that under estimated the volition of members to want out.
Where there’s a weak covenant…
The Pension Regulator’s Integrated Risk Management framework is designed to link an assessment of investment strategy to the capacity of a sponsor (employer) to meet future bills. Any covenant assessment of TATA Steel over the past two years would have shown that there was a high likelihood that the employer would withdraw full support for the scheme. This infact happened early in 2017, what is unusual is the stay of execution created by the RAA which was designed to give members space to move to BSPS2 but also gave opportunities for steelworkers to jump out of BSPS and into a personal pension.
The same type of weak covenant assessment must have been sending red flags to the trustees of Carillion and will be doing the same to a few other schemes. The integrated risk management framework allows tPR to see which schemes are most in danger of failure and – by extension – where it is most likely – the next feeding frenzy might arise.
If the Pension Regulator has intelligence, this could be shared with the FCA – if the Trustees of an occupational pension scheme have evidence of a high incidence of transfers following a pattern, there is an anonymous helpline they can use to avert the FCA of a need to look into things.
There are also specific people in the FCA who run teams to prevent the development of future Port Talbots. If any Trustee or administrator wants details, I am happy to share my intelligence.
Do not be too quick to judge
The problem with being close to a situation, is that you lose perspective. It is easy for people like me to cast stones at regulators, but it’s hard to see how this is helpful.
Past performance is no guide to the future, but the future must learn from the past (if we are not to fall into Einstein’s definition of insanity).
Trustees, the Pension Regulator , employers and other IFAs could all have anticipated Port Talbot and so could the FCA. We all need to shoulder some of the responsibility for allowing the situation to develop as it did but that is not the point of this blog.
The point is that if we are to talk of “integrated risk management” , we must now include in the framework, the impact of a failing sponsor not just on a scheme , but on its membership.
I’ve spent the last 24 hours with a group of Trustees, trying to make just such a point!
I would argue that one of the reasons for the failure to intervene earlier enough is that there is not enough open discussion between advisers and regulators. There is still an element of “The London Elite” inhabiting roles at the FCA and the really good staff like Rory and Mark Goold being the exception rather than the rule. They also tend to remain in their post for an awfully long time. There needs to be many more TEMPORARY FCA roles which are made attractive for advisers and not just career supervisors or bankers. One only has to look at the Linked-in profiles of the F-packs staff to see where there will be a problem.
There is just ONE temporary 9 month job advertised at the FCA at the moment, which might be attractive to a career adviser like me (originallty it was only advertised for SEVEN days over XMAS!!! it has now been reposted until 23rd Jan), when the FCA should be encouraging advisers to take 3-9 months PAID secondments of this nature to work with the FCA on their Theamed interventions and projects.
This is touching on the crux of the matter. We are not seeing any close relationship between regulators and spotting any adverse trends is taking too long for action. It’s no good regulating in arrears, there must be more pro-active steps taking anticipating gaps in information and likely targeting by scammers
One also asks the question of trustees – are they doing enough to protect members. It is the duty of trustees to provide all information (there was a total lack of mention of the alternative Tat DC scheme, and insufficient examples of potential scams or ‘too good to be true approaches). I assume there is a Member Nominated Trustee?? Surely he/she must ensure knowledge of the mood and confusion of members and highlight the trustee board accordingly.
Early flags are essential; more should be done by trustees right up to the point a member’s funds leave the scheme with regular updates of information plus closer monitoring of destination schemes / plans
TPR knows of many individuals or organisations inappropriately targeting DB transfers, these names should be shared with trustees on specific requests basis. Instead, currently they are a guarded secret and retrospectively we hear ‘oh yes we had a file on them!’