Polarised or bi-polar? DB transfers today.

Screenshot 2020-02-20 at 07.05.05

Smith and Rush – voices of reason in a disturbed world.

Back in November, I reported on Ruston Smith’s initiative at Tesco to provide his colleagues with help finding the right type of adviser. AgeWage had been helping Ruston promote this to other firms earlier in the year and I’m glad to see a report from Jo Cumbo on how all this is taking shape.

Screenshot 2020-02-20 at 05.43.51Of course it shouldn’t have to be like this

The conduct of IFA’s is part of the scrutiny of the Financial Conduct Authority who have powers to stop rogue advisers practicing. The FCA are effectively protecting the Financial Services Compensation Scheme which is funded (amongst others) by IFAs. There should be checks and balances in place so that Tescos and large employers with DB schemes, do not have to spend money on extra protection.

But it is like this because we have not resolved the philosophical conundrum of giving people “freedom and choice” with their retirement money and protecting them from being “their own worst enemy.”

Say it quietly but many of the people who shout loudly about stopping transfers for others, have or are taking transfers for themselves.

If you  had a DB transfer pot – what would you do?

I’m quoting again from Dunstan Thomas’ recent research.

One in 10 (10 per cent) of those with DB pensions recorded a pension value in excess of £700,000, whereas just two per cent of those with DC pensions had a value over that same threshold.

Despite (or perhaps because of) generous DB valuations over recent years, demand for DB to DC transfers amongst Gen Xers remains strong: nearly two thirds (63 per cent) of those still in DB policies are considering whole or partial DB to DC pensions transfers in order to access some of these savings from the age of 55.

Merryn Somerset Webb’s famous proclamation that as a grown-up FT journalist she’d take a DB transfer if she had one is either famous or infamous depending on which camp you sit in.

And people aren’t stupid. Every time a major employer reports bad news and their share price slumps, pension departments see a spike of transfer requests from former employees (and even the odd active employee) finding their way to the door. The higher your pension , the higher your loss if your scheme goes into the PPF and once the PPF assessment starts, it is too late to get your money out.

People who know, do their own covenant assessments on the sponsors of the schemes they are in. Ironically they are doing precisely what people like Stephen Soper, who heads PWC’s pension risk team, are telling trustees to do and if they take the CETV because their covenant assessment tells them the risk of staying in the scheme is too great, they are taking precisely the decision that led to over £3bn leaving the British Steel Pension Scheme during Time to Choose.

So when is a good transfer a bad transfer?

Perhaps the person I’d most like to ask this question of would be Stephen. Stephen was at one time the director of The Pensions Regulator’s DB team, when he left for PWC , one of his first jobs was to act for Tata in setting up the Regulatory Apportionment Agreement that created the steelworkers “Time to Choose”.

He is now quoted in the FT as organising a way to protect members from choosing the wrong way

“I have recently met with several FTSE 100 and indeed some non-public entities as well who, motivated by the British Steel situation and the FCA’s recent findings of extensive mis-selling, are keen to find ways to ensure their members receive good advice as they enter retirement,”

At least some good has come of the debacle in Teeside and Port Talbot when steelworkers were forced to make choices with little or help at all.

The Regulator has still to intervene by implementing a ban on contingent charging . The  insurance market is refusing or “loading” insurance on many advisers actively facilitating DB transfers. The impact of Professional indemnity Insurance on the availability of advice is documented here.

Whether the insurance market is doing the regulation or regulators driving the insurance market is a matter for debate.

It would be nice to draw a line in the sand but…

Next Thursday, bus-loads of former BSPS members who took their transfers and are now claiming compensation for the poor advice they got, will arrive at Westminster to explain how the FSCS scheme is failing to help them. They are being organised by Al Rush who has spent over two years actually clearing up the mess.

The steelworkers heard yesterday that one of the advisers at the most notorious of the advisers (Active Wealth Management) has finally been stopped trading by the FCA.

Al is quoted in Professional Adviser

“This is a damning indictment on many levels, and exposes in harsh and unblinking focus the disgraceful behaviour [steelworkers] were exposed to.

“I hope that this ruling strikes fear into the hearts of others who seek to benefit from their industrialised processes which subordinate the needs, wishes and feelings of decent hard working steelworkers to their own selfish requirements.”


Andrew Deeney , MD of Fortuna

But the ruling against Andrew Deeney and Fortuna has happened in 2020. Since 1992, Linked In shows Deeney having worked for 10 different financial advisors including Allied Dunbar and St James Place. He worked for various parts of Darren Reynolds Active group between 2014 and then bought Darren Reynolds’ clients for £5,000 to become MD of Fortuna.

As far as I can see, he has been authorised by the FCA and its predecessors on each occasion.

Fortuna is now appealing against various determinations by the FCA including that he oversaw the inappropriate sales of high risk bonds and continued charging Darren Reynolds’ clients fees for which no service was offered.

Is it any wonder that Professional Adviser are backing a  campaign to protect financial advisers from the consequences of such behaviour – the inevitable hike in FSCS levies that will follow?

Polarised or bi-polar?

In  polarised positions, two parties look at one problem and take radically different views. I think it’s fair to say that Merryn and the FCA’s stated views on pension transfers are polarised.

Bi-polar behaviour  shows people swinging from one position to another, seemingly irrationally. For many people who may benefit professionally from transfers (including the sponsors of DB schemes), the needle swings between supporting and decrying pension transfers. The £3.2bn that left BSPS through CETVs made BSPS2 the stronger, but the FCA claim that £20bn that has left DB to DC has made people’s retirement planning weaker.

I am not saying that people like Stephen Soper are showing signs of schizophrenia. Stephen is a calm  and deeply serious. But he is having to ride two horse at the same time. Firms like PWC have promoted de-risking through the promotion of enhanced Transfer Values (ETVs) and have stood back and watched as advisers who have executed these plans have had their permissions taken away.

Now he is overseeing the actions of those people who in another environment  he would have sort employment for – doing much the same thing. His firm which benefited from setting up the  BSPS RAA – is now set to benefit from clearing up its fall-out.

This can’t be good for the moral or mental health of practitioners, regulators and most of all the bus-load of BSPS casualties arriving in Westminster next Thursday.

This leaves FSCS, who’s every claim is a battle ground between those requiring justice and those unwilling to pay for it.

It leaves the FCA who are charged with making advice available, but have to shut down firms like Fortuna.

And we see firms like Tesco, trying to do the right things by members but risking being seen to “promote transfers” by some and “restrict advisers: by others.

Ruston Smith is of course in the thick of it. Thankfully he’s pretty level headed and will keep a sense of humour where everyone else is losing their’s!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Polarised or bi-polar? DB transfers today.

  1. henry tapper says:

    one of my friends has left a comment on Facebook

    Henry, I usually really enjoy reading your blogs, many of which have a sensible moral and ethical foundation to them. In the case of this one I’d like to point out that sometimes it’s tempting but hurtful to others to use serious mental health diagnosis like bipolar or schizophrenia to mean something else. These terms, unfortunately, are not very well understood by the general public and by using them in a way that does not specifically relate to the health conditions they describe, we can add to that misunderstanding. Often misunderstanding leads to/ increases flippancy, or worse – prejudice, fear and stigma. I know you didn’t mean harm, and I hope you’ll understand.

    I agree that the phrase bi-polar is emotive, and have responded – explaining.
    I realise that my use of “bi-polar” as a metaphor for the confused behaviour of people, regulators or markets, might disturb people and I’ve tried to explain why I’ve compared “polarised and bi-polar” as I have.

    I’m not calling out anyone as bi-polar in this debate. Bi-polar is used in geography and geometry as a description of violent fluctuations between two points and it is used in this context in that way. Like “schizophrenic” which is now absorbed into everyday speech , the phrase’s medical connotations which help people understand the wider issues.

    There are many other words which I enjoy using like “gay” which have much wider resonance, but can – when used precisely – give deep insights. I hope that this blog gives people insights without belittling people who have bi-polar disorders.

  2. henry tapper says:

    For the same reason, I defend the use of the term “covenant assessment” to describe what people do when deciding to get out of a DB scheme they think won’t be supported for long by its sponsor (a boss or former boss). BSPS members regularly referred to TATA as “Twatter ” between themselves and this was a covenant assessment (but not of the formal type practiced by the likes of the big four accountancy firms)

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