“I wonder how many of the financial advisors who recommended transfers out , predicted a 10% drop in the stock market in one week? Not many is my bet.”
This is a post on the main British Steel Pensioners Facebook page.
So far it has attracted two comments; this sage advice
“No one can predict things like this . That’s how investments like these work , especially with pensions . It’s a long ride . What you have to worry about is when you retire and what your investment looks like then , not short term “
and this savvy observation
10% drops good for me transfer is pending.
actually there is a good deal of money “pending transfer” some estimates suggest that only a third of the transfers requested, have so far been completed.
All the same, there are a lot of steel workers who will have lost more in a week than they will earn in a year.
Easy come, easy go?
“Is it ever real money, until you can spend it?”,
a question a relative of mine asked over the weekend.
“Personally I will withdraw my entire pension fund on the day I am able to, in order to secure it as my own money and to prevent it disappearing due to mismanagement”.
a comment (8.58am 11/02) in the Daily Telegraph behind Katie Morley’s article on pension freedoms.
What this suggests is that privately held pension pots aren’t seen as “fungible”, that is , they cannot be exchanged for goods and services, pension money is not real money.
The arrival of billions of pounds into the pension pots of those leaving BSPS, was not anticipated as a transfer of wealth by most steelworkers. As one person commented on a recent post on this blog, most steelworkers feel they are transferring fiduciary control of their money from trustees to financial advisers. Many expect their cash flow plans and drawdown projections to be met with the same certainty as they expected their BSPS pensions. That is not something I can prove, it is simply an observation from conversations I have had.
The lessons ?
This week I will be talking with two of Britain’s largest pension funds about the lessons of Port Talbot.
I have put the Facebook quote at the top of the article on the front page of the slide deck we will be using.
This week Frank Field and the Work and Pensions Select Committee will be publishing their report into the British Steel Pension Scheme. I hope they will addressing that very question.
And as one inquiry closes, another is opening. The same question will be asking whether there is use for collective DC pension schemes.
I think that if I was a member of the British Steel Pension Scheme and was offered a transfer value worth £400,000 and had the choice of that or a pension sponsored by an organisation I loathed or a pay out from a Government lifeboat, I would consider that a good alternative.
That the invested value of that money could fall £40,000 in a week would not touch me, since the £400,00 was not “fungible”, it did not translate into spendable cash.
And yet that £400,000 represented only 95% of the fair value of the BSPS pension being given up (an insufficiency report was in place) and those who still have rights within BSPS have not been impacted by the recent sell-off.
For most people who have or who are taking a transfer, the penny has not dropped. The lessons of exchanging a pension for a pot, will be learned over time. Perhaps over time, we will come to understand why the FCA consider over 50% of the advised transfers they have recommended – unsuitable.
For those whose money has left BSPS, there is no way back. I do not expect to see mass restitution, even if the Government demanded it, the SIPPs into which most of the money has transferred are not financially resilient enough to afford the restitution payments.
The “other way” for people to get paid a pension, maybe a better way – is to return to a collective pension – written as a collective defined contribution scheme.
If you remember the poll conducted on the Facebook pages at the commencement of the BSPS Time to Choose, you will remember that most people who responded said they did not want freedom to do what they wanted, they just wanted a new organisation to manage their money (pot).
I suspect that had BSPS had the leadership of the CWU- as Royal Mail had – they would have been asking – as 142,000 postal workers are asking – for a “wage for life”.
The postal workers have a settlement with Royal Mail , but the steel-workers who have transferred, have no settlement with Tata.
I hope that the Work and Pensions Select Committee will make the connection and for see how the postal workers settlement could have been a BSPS settlement. If not sponsored by Tata, a CDC “wage for life” – could have been offered to steelworkers as a default transfer option.
In my opinion this wold have made the “Time to Choose” a whole lot better. But that is with the benefit of hindsight and as I type today – with some trust in Government foresight.
There is still no certainty that Royal Mail will get its pension settlement. If the argument for why we need a new type of pension lies anywhere , it is in that statistic that 83% of steelworkers responding to the poll “wanted to take their pot and let their IFA manage it”.