LEBC – the demise of “de-risking”?

Yesterday LEBC  resigned its permissions to offer regulated advice on the transfer of safeguarded rights within a pension scheme (DB transfers).

It also decided to stop advising on Flexible Retirement Options such as Pension Increase Exchange and Enhanced Transfer Values.  This means that they will not only not be tendering for new schemes, but existing projects will go uncompleted.

This is a major change in direction for one of Britain’s senior corporate pensions advisers and suggests an intervention by the FCA.

We learnt of this through Hannah Godfrey

and NMA were quick to follow up on the implications for the industry

We should be in no doubt that the regulatory climate has changed.

Awkward regulation

Unlike individual CETVs which are initiated by members, the work LEBC was involved with resulted from discussions between trustees ,sponsors and their institutional  advisers – typically the pension consultancies of large accountancy firms and the corporate arms of the actuarial consultancies. The advice to set up these ETVs and FROs did not come from directly regulated firms but from firms working under the permissions granted by the Institute and Faculty of Actuaries. Firms as various as Aon, Mercer, Willis Towers Watson and my own First Actuarial.

The work was carried out with the full knowledge of the Pensions Regulator and there has been free interchange between the Regulator and these firms in terms of senior personnel. David Fairs, ex KPMG is now head of policy at tPR, Steven Soper, now at PWC was Executive head of DB at tPR.

It was convenient all round that the actuarial practices had firms such as JLT, Origen and LEBC to do the de-risking and I expect a roaring silence from them over what appears to be a firm “no” from the FCA on what was firmly “yes” from tPR.

LEBC are caught in the middle and I feel for their head of Retirement Advisory Nick Flynn and their CEO Jack McVitie.

What does this mean for schemes and their advisers?

LEBC were generally considered within the industry to be the go to company for individual advice forming part of corporate de-risking programs. They offered services to employers and members not only got the benefit of LEBC’s advice, but had the bill picked up either directly or indirectly by their bosses.

Trustees were comfortable with all this as the funding position of their schemes (especially on a buy-out basis) was improved. This did not of course mean that the scheme was improved -the scheme shrank and its social purpose diminished, but trustees are taught now that their first duty is to tPR , who’s first duty is to the PPF and the fact that the scheme was set up to pay pensions (not (c) ETVs or PIEs) is forgotten.

The days of de-risking through offering members what Steve Webb used to call “sexycash” seem to have entered a crepuscular darkness.  I have predicted that this would end badly and it has.

The problem is that tPRs agenda has stopped being about people’s pensions and become about  pension schemes. Instead of worrying how to get people their pensions, tPR now has to worry about the politics of solvency. Meanwhile the FCA have intervened and look likely to intervene a great deal more.

Until recently, pension schemes and their advisers did not have to worry about the FCA, but that is changing fast. The CMA has recommended that investment consultants become FCA regulated, many schemes now report DB transfer activity to the FCA and now some schemes will be caught  in the middle of a de-risking exercise, without a key part of the advisory chain.

The message for schemes and their advisers (and I include my own firm in this)  is that the FCA aren’t coming – they’ve arrived.

How will this go down in Brighton?

The Pensions Regulator is in Brighton and the FCA are in the east end of London.  They are only 70 miles apart physically, but the policy agenda looks wider than that.

I would be very surprised if, in the current climate, any more tenders for ETV and FRO “exercises” are issued this year. Since the funding plans of many of tPR’s schemes depend on further de-risking, the FCA appear to be throwing a spanner in tPR’s works.

I do not think that this intervention will go down well in Brighton.

How has this gone down with IFAs?

The IFAs who’ve been noisy on twitter pick up on LEBC offering too much for too little

Ironically, LEBC did not charge for advice on a contingent basis and no doubt this will be picked up by the IFA lobbying groups who can now point to an example where fixed fees led to bad outcomes.

In short the IFAs who act as pension transfer specialists are dancing up and down with glee.

How does this go down with the consumer?

I have not heard any consumers complaining about the way they were dealt with by LEBC, my professional experience suggests that customers were only too pleased to have LEBC’s services offered by their employer and that LEBC carried out their work to a very high standard.

But I do not know what has carried on between the FCA and LEBC , we have only the cold comment of LEBC’s backers, B.P Marsh

As part of its market-wide review of the DB transfer market, the FCA has undertaken a review of LEBC focused on the division of the business that provides DB pension transfer advice. Following this, LEBC has agreed voluntarily to cease the provision of DB pension transfer advice and projects, forthwith.

“In line with its successful long-term investment strategy, B.P. Marsh will continue to support LEBC as it evolves its business, which provides a range of financial solutions, for the benefit of its customers, staff and shareholders.”

LEBC will move on , and so will the industry, the days of de-risking through FROs and ETVs look over and ironically – it was not the Pensions Regulator but the FCA that called time.

Some consumers may wish that LEBC had called earlier.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to LEBC – the demise of “de-risking”?

  1. John Mather says:

    “In short the IFAs who act as pension transfer specialists are dancing up and down with glee.” Really? Surely the transfer bias “de-risking” has just been removed. At the same time IFAs, fed up with the constant compensation fees levied on the competent as a result of a few crooks, have withdrawn from the market.

    Who in their right mind would accept a £350,000 Life Time liability for a £1,500 turnover with nil profit especially when the complaints procedure does not penalise the selective amnesia of some opportunist complainants.

    The root of the problems in DB pensions are in the legislation and no layers of sticking plaster will fix it.

  2. Julie Richards says:

    it is time we stopped this piecemeal approach to how an individual can decide on what is the best fit for how to mange their “pension assets” into the payment cycle. Contradictions abound between Government policy (and the freedom to choose how to save and draw on assets) and the policing of those choices. The role of whipping boy seems to alternate between Trustees and IFAs, depending on the political motivation of the day and which regulator feels their own reputation needs protecting (is this ever about doing the right thing for savers?). Simply falling back on a blanket criticism of TVs (enhanced or not), FROs etc is just not good enough.

    For me it comes back to two indisputable but simple points – individuals need good guidance, information and access to affordable advice; advice and services have to be paid for. If individuals have choices and need advice or guidance to exercise those choices then we urgently need to find a consensus on how best to deliver that in a fair and transparent manner so that all can access and not just those who have high disposable income to spend on such: the latter have been, and always will be, well catered for.

  3. Ros Altmann says:

    I must admit, Henry, that I feel there is some over-reaction on the part of some commentators who seem to believe it can almost never be right for members to give up their DB benefits. I consider that many people with small deferred entitlements in a DB scheme can benefit from transferring to DC (most will have other sources of guaranteed income) and this can help both the scheme and the member over time. However, the value of cash transfers has potentially selected against remaining members and the actuarial practice of telling trustees they must offer 100% value (regardless of scheme underfunding on a buyout basis) will probably be shown to have been unwise in the long-term. A ‘market value adjustment’ should be made for underfunding and I believe that all members who wish to transfer should be charged for the advice they need. The £30,000 cut-off is not low enough, but of course advisers are stymied by draconian and retrospective regulatory decisions. Removing the tiny deferreds can materially help a scheme’s long-term sustainability, but only if the decision is made with full information, the transfer value is not stacked against existing members and there is a properly documented advice trail.
    Not all DB transfers are wrong, even if the member is in good health. It depends on their overall cirumstances and financial advice (after initial free guidance) is likely to be the optimal way forward.
    It is a real shame that LEBC has had to withdraw, but we don’t know what the issues were at this stage.

    • Robert says:

      Hi Ros,

      For some members, giving up their DB benefits can be the right thing to do, but for most it is likely to be unsuitable……would you agree?

      On 19/06/2019 the FCA announced further action on defined benefit transfers which included……”The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their defined benefit pension schemes despite the FCA’s stance that transfers are likely to be unsuitable for most clients.”

      “Megan Butler, Executive Director of Supervision, Wholesale and Specialists at the FCA stated……’We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.”

      Also, on 30/07/2019 the FCA published a package of pension related proposals designed to improve the quality of pension transfer advice, and to help consumers get better value from their pension. The package includes a proposed ban on contingent charging for pension transfer which stated……

      “The proposed ban on contingent charging is designed to protect customers from the conflicts of interest which arise where a financial adviser only gets paid if a transfer goes ahead. We have carefully considered the available evidence on the impact of banning contingent charging, including how we can maintain access to advice for those groups of consumers who would benefit from a transfer. Therefore, the proposed ban would apply unless consumers have specific circumstances that mean a transfer is likely to be in their best interests.”

      “The FCA is also looking to address the conflicts of interest which arise where a financial adviser advising on a pension transfer stands to receive ongoing fees – which in some cases can be for 20-30 years following the transfer. The FCA has proposed that advisers will be required to demonstrate why any scheme they recommend is more suitable than the consumer’s workplace pension scheme.”

      “Christopher Woolard, Executive Director of Strategy and Competition at the FCA said……’The FCA’s supervisory work has revealed continued problems in the pensions transfer advice market. By making changes to the way advisers are paid for transfer advice and the other changes to transfer advice we are proposing today, we want to ensure people receive suitable advice and drive down the number giving up valuable defined benefit pensions when it is not in their interests to do so.”

  4. henry tapper says:

    Thanks Julie and Ros, interesting that you comment from senior roles in corporate and governmental policy. It seems a shame that a firm with integrity will not be around to give people help with transfers, but knowing the people who run LEBC, I am quite sure they took the decision for good reasons.

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