Now that’s what I call financial advice.

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The boys are back in town

I’m quoting Al Rush from the Facebook post he made yesterday evening following the meetings of steelworkers with MPs and Regulators yesterday.

 Al’s message to the steelmen

Sometimes, in my line of work, it can be dispiriting to work for people who are greedy to the point of unreasonableness. Sometimes, when you are putting together something for people and it comes off, it can be quietly satisfying. Yesterday eclipsed everything because not only was I in a room where we achieved the latter, but we all achieved it for people for whom the former couldn’t be more further removed.

I was, as always, struck by you being as respectful, proud and as dignified as you always are. James, my son, said to me afterwards, “Nat (his other half) has an Uncle Mick who works at the Scunthorpe plant and they’re all exactly like him except it’s rugby not football”. And it was meant as a 100% compliment. Chris, you said to me “We’re simple men”. You’re not – you’re ‘just’ straight down the line blokes who expected to be treated as you would treat others.

What’s nice about this is that you’re now able to do the stuff I know that some of you wanted to do – give the wife a decent Xmas, get married, slip a few grand to the kids so they can buy a house, pay off the mortgage etc. It also means that you can weather the current financial buffeting a little better by not dipping into investments, and that you might be able to fund any follow up action via Philippa with a far easier mind.

It was vital that you took the fight to London because you had to be seen to be fearless in the face of adversity and yet another knockback, and you had to be seen to be willing to have the controlled aggression, endurance and the stamina twelve months on, to mount up into your car’s and trains, and head east to take the fight to them, on their home ground. It also sent a string message to the legal representatives of anyone who may be the focus of later legal action “Don’t mess with us, we want a peaceful and quiet life, but it would be fatal for you to mistake our quietness for weakness”.

This morning, Philippa has organised a conference call with Henry and me to discuss the most pressing priority – namely present a case to FSCS within the next week to justify fine tuning the discount rate. So, life goes on. And so will your case. Ultimately, I’m sure, justice will continue to prevail. For now, slip back into cruise mode, take the long view, be prepared for long periods of seeming inactivity, be prepared to step up to the plate again when needed but above all.. just enjoy a Christmas with your families and loved ones.

But, it was an honour to go into battle with you and for you, and although rifles were loaded and cocked, it was an honour to win without a shot being fired. You were superb, and Wayne’s final word on your behalf summed it up perfectly. See some of you next week. I apologise for bumping some of you back a week. Someone put this on my Facebook page yesterday – I was gobsmacked.. I can’t believe we did it all in two weeks.

I was an observer, I posted after that I was gobsmacked – I really was. Most of all I was gobsmacked that at a day’s notice, the FCA, tPR, FSCS and so many members of parliament turned up, waited and then engaged. That goes for the press too.

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The argument

FSCS has agreed to review the compensation amounts they’ve suggested to steel men. They’ve agreed to do that within seven days, which is why we are gathering evidence now.

The main lever that will change compensation is the discount rate at which the loss is calculated. The rate used at the moment is 3.7% and is the general rate used on all transfers. During the meeting – FSCS suggested there might be special reasons for using a lower rate for steelworkers, which would increase compensation for this group.

A large number of IFAs and pension experts have been tweeting on this subject and they include Al Cunningham, who was present yesterday. All the tweets were constructive and together they present a balanced view. The cost of any FSCS claim will be largely met by these IFAs, their balanced view is most important.

At the nub of the problem is the issue of guarantees lost and the risk of over-compensation. If you take the view that the loss of certainty is key to the argument, then you would go for a risk free rate of 1.7-1.8% (the gilt rate). If you take the view that this would be giving those who’ve transferred the chance to game FSCS – then you stick with 3.7%. Old arguments are resurfacing from the days of mass miss-selling redress in the nineties.

FSCS is not a generous compensator. Some Steel Men have lost over £200,000 (as much to do with adviser incompetence as greed). The maximum pay-out on existing claims is £50,000. Though claims can increase to £85,000 from April, this is only for new claims.

So the liability for the Steel Men is capped. But the wider implications are obvious. My personal view is that the £38.6 bn that flowed out of DB schemes last year – was a disaster. The FCA consistently advise that a substantial amount of this money should not have moved and as it moved – for the most part – under advice. Redress will be expensive.

Necessarily the redress will be paid for by good advisers as well as bad and for good providers as well as bad. This is partly why good IFAs are so angry.

But the deeper reason for good IFAs to be angry is written into the post of Al’s. I wish Al, Chive and the wider IFA community the best.

I wish the Steel Men proper compensation – which needs to go beyond FSCS limits. Sadly, most of the IFAs involved in the worst excesses of what happened at BSPS, will not have sufficient resources or insurance, to properly pay. This is why it is vital that FSCS pays what it can – and without demur.

I’m very encouraged by this – from Al and the Steel men’s lawyer – Phillipa Hann.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Now that’s what I call financial advice.

  1. Eugen N says:

    Great post Henry, very balanced as well.

  2. Robert says:

    Yesterday’s meeting in Parliament sounds very promising. I hope the good work that is being put in by Al Rush, Philippa Hann, yourself Henry and all those involved is successful and the correct level of compensation is paid to the steelworkers.

    Taken from this blog………..“My personal view is that the £38.6 bn that flowed out of DB schemes last year – was a disaster. The FCA consistently advise that a substantial amount of this money should not have moved and as it moved – for the most part – under advice. Redress will be expensive.”

    Alistair Cunningham, chartered financial planner at Wingate Financial Planning, who was also present at the meeting between steelworkers, MPs and regulators, said: “The reason for the poor advice was in moving from a risk-free scheme (BSPS) to a risky one, and they (steelworkers) should never have taken any risk.”

  3. DC says:

    I think to say that the BSPS was a ‘risk free’ scheme would be massively exaggerating the competence of the trustees/administrators and the covenant of the sponsoring employers.

    Had they handled the interests of their member s more prudently you wouldn’t have seen the ‘seagulls at the trawler’.

    Hopefully the scam artists will get their punishment but I think we all know the majority will escape any real harm. They have (and still can) phoenix into another firm on a whim, appoint a dummy Director etc. ‘Dispiriting’ doesn’t quite cover it.

    As usual the cost for the dodgy UCIS/overseas stuff will effectively be added onto the levy for everyone else, despite the fact that most of those investments are not covered by the compensation scheme. So advisors recommending onshore collective funds for example are picking up the tab for folk investing in Brazilian forestry unit trusts. What a joke.

  4. Robert says:

    BSPS2 is now fully funded and it will be mainly invested in bonds (derisked) from now on. The new scheme is well catered for now and for the future.

    The BSPS Trustees have stated: “We’re very confident the new scheme is robust and well-funded. Tata Steel UK is the sponsor so has responsibility for any deficit. We don’t think we’ll need that support, because the scheme is designed to be self-sufficient. The new scheme’s investment strategy is low-risk. There should be enough money in the scheme to pay benefits, even if there’s only a modest level of return on our investments. There is also a buffer of extra money in the scheme, just in case things don’t turn out as expected. However, if for any reason in the future the new scheme can’t carry on, it is designed to be protected by the PPF. So the scheme could enter the PPF and members would then receive benefits at PPF levels.”

    I am a TATA employee of over thirty years who was offered a very substantial Cash Equivalent Transfer Value (CETV). As it was such an important decision to make, I trusted and based my decision to move into the new BSPS2 on the likes of guidance provided by the BSPS Trustees, Financial Conduct Authority (FCA) and the National Trade Union Steel Co-ordinating Committee.

    The BSPS Trustees provided a ‘Time To Choose’ personal options pack which was sent out to BSPS members in October 2017. I found this very informative and it clearly explained all the details and options I had of moving into BSPS2, the PPF or transferring out, and it included various detailed examples of what members might choose in order to help them in making a decision. In it, the BSPS Trustees stated……..“You should think carefully before transferring out. You would be giving up guaranteed future pension income in return for income that might not be guaranteed and could vary depending on how you manage it. Even though transfer values can seem very large, transferring out is unlikely to give you as much total pension income as either the PPF or the new scheme, on a like-for-like basis.”

    At the time the FCA said…….”In most cases you are likely to be worse off if you transfer out of a defined benefit scheme, even if your employer gives you an incentive to leave. The cash value may be less than the value of the defined benefit payments to you and your eventual pension payments will depend on the performance of the new scheme, with the risk that the scheme does not deliver the returns that you expect.”

    In the June 2017 edition of TATA Steel’s ‘Delivering Our Future’ newspaper there was a Joint Statement from the National Trade Union Steel Co-ordinating Committee which said: “While everyone’s circumstances are different, our pension experts tell us that scheme member’s benefits in retirement are likely to be better protected in BSPS2 or the PPF, rather than through transferring out.”

    Further to this you had various pension experts warning about the pitfalls of transferring out from defined benefit schemes.

    I met with several reputable IFA’s for their advice on whether or not to transfer out of the BSPS. They had all the pension transfer credentials, but not one of them considered that I move into the new BSPS2 and they recommended I transfer out instead. I wonder whose best interests they had in mind?

    As you say “Hopefully the scam artists will get their punishment.”

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