There is a story untold about Lighthouse’s relationship with the BSPS trade unions. It is one that reveals some alarming conflicts within the Union movement, specifically in the “affinity agreements” that gave union members access to free advice
This clear offer of a benefit to the Unite member, does not mention any profit share to Unite on introductions. Similarly, Tim Sharp’s letter to Frank Field in response to the Work and Pension Select Committee’s questions , does not reveal any payments to the unions from Lighthouse.
So what exactly was the nature of these affinity partnerships that were so popular with the unions? In August 2017, around the time when the British Steel Time to Choose was happening, FT Advisor reported
Lighthouse has 19 “affinity relationships” with a number of employee organisations representing more than 6m members.
These include Unison, Unite, BA Clubs, Fostertalk and the Royal College of Nursing.
The popularity of these deals suggests that there was substantial motivation for employee organisations to sign up . Until it is clear what that motivation was, suspicion will continue that there were substantial introductory fees involved.
So what went wrong for Lighthouse at BSPS?
Quilter (formerly Old Mutual, formerly Skandia) have recently purchased Lighthouse for £40m. For a firm operating 400 advisers this is a small consideration and suggests that it knew that there were some “warts” in the deal.
The first 30 warts are a group of steelworkers for whom Quilter has made a provision of £9m as recompense for poor advice. Readers may wonder how provision can run at £300,000 per client but this is quite possible.
The BBC reported on one steelworker (Richard Bevan) who claimed shortly after transferring, that he’d been short-changed by £200,000. Richard didn’t use Lighthouse but I know of steelworkers in Scunthorpe who did and had a similar grievance.
The issue is highly technical but is summed up in Bevan’s testimony to the BBC,
He said he was advised to leave the scheme even after he had been written to by the BSPS warning him that a revaluation was under way that could mean he had much more in his savings pot than previously thought.
The reason that Bevan lost so much was because he took his money out before the revaluation happened. This is what New Model Adviser refer to when reporting on the Lighthouse 30. Except the technical reason for the revaluation wasn’t that £500m had been put into the scheme but that the scheme moved from an equity to a bond funding basis.
This meant the scheme discount rates changed and they more or less doubled the transfer values for younger members like Richard Bevan and the Lighthouse 30.
The £500m injection into the scheme meant that the scheme actuary could recommend a value adjuster on the transfers be partially lifted, this wasn’t the tigger for the change in discount rates.
That Lighthouse proceeded to transfer out members who were in the same situation as Richard Bevan beggars belief. Not only did they do it in the full knowledge of an impending hike in transfer values, but they did it in front of the unions who they had been introduced by.
So “doing the right thing for the Lighthouse 30” may mean using up every penny of the £9m already set aside, but there are 300 of these transfers and Paul Feeney, Quilter’s CEO is saying that the remaining 270 are all to be investigated – even those that got the higher transfer value.
Why such largesse from Quilter?
While it is unlikely that the larger group will be as expensive to deal with as the first thirty, it looks like the next 270 will cost at least as much as (and probably more than) the price Quilter paid in the first place
This suggests that the cut-price £40m Quilter paid for Lighthouse was in full knowledge of the cost of recompense.
But why is Quilter not asking questions of the introducers in all this? And why are the unions so quiet about the deal?
Back in 2017, IFAs queried why Lighthouse was taking 3% of the transfer value and a 1% pa management fee on the money transferred.
One remarked that he’d expect union members to be getting a substantial discount over what appeared to be Lighthouse’s standard rate at the time.
The same might be said of Paul Feeney’s largesse. Why is Quilter on the hook for it all? Is there something more valuable than the cost of restitution that needs not be disturbed?
What were the unions doing?
300 transfers at an average transfer value of £400,000 represents a lot or money flowing out of the scheme. If the unions who introduced Lighthouse had any kind of quality control over the advice that was given, they surely would have been concerned by what was happening.
Did the unions get duped, did they turn a blind eye or were they actively in on it?
None of the above sounds good news for the unions involved which may explain why they have taken a backseat in the redress for members , led by Al Rush and Phillipa Hann.
We now know that Active Wealth Management, were transferring on an industrial scale thanks to access to the workplace created by their introducer, Celtic Wealth Management. But the 300 transfers advised on by Lighthouse seem to have come about by the same route. While it would be wrong to compare Celtic Wealth with Community and Unite, it’s hard to absolve the unions of responsibility for what happened.
The price of affinity?
“Affinity” worries me. There is nothing wrong with unions being paid for introductions so long as it’s over the counter. But this looks like there were under the counter transactions going on and sooner or later the price Lighthouse paid for the deal cut with the unions will be revealed. When it is , then it will be the worse for the unions .
It would be best if transparency prevailed and the unions fessed up to their commercial interest in all this money moving.
The alternative will be a gradual disclosure which could become messy. For the ongoing relationship between Quilter- Lighthouse and the various affinity arrangements in place , to prosper, it would be best to clean this mess up.
As Andy Agethangelou would say “transparency is the best disinfectant”.
TATA Steel UK publishes a fortnightly newspaper with news and views which is called ‘Delivering Our Future’. This is readily available all around the TATA plants and copies are usually kept in designated areas e.g. outside mess rooms, canteens etc.
In the June 2017 edition (issue 248) there was a full page designated to transferring your British Steel pension which urged members to think carefully before going down this route.
The headline was “Joint Statement From The National Trade Union Steel Co-Ordinating Committe.”
The following information is taken from the article………
“We understand the uncertainty around the future of the BSPS is extremely difficult for some scheme members and this has not been helped by the media speculation.”
“It is unsurprising that this uncertainty has led to some members considering transferring their pension to a money purchase arrangement, however we would urge all members to think carefully before going down this route.”
“We are aware that the current circumstances have led to a number of financial advisers, some with questionable motives, contacting BSPS members and offering to help.”
“These financial advisers will charge for their services and costs can vary hugely.”
“The Pensions Regulator stresses the need to exercise caution and warns about potential scams, particularly where individuals receive unrequested approaches from financial advisers, and says it is vital scheme members make properly informed choices on the basis of all the facts.”
“On 16th May TATA Steel announced it had agreed the key commercial terms of a Regulated Apportionment Arrangement (RAA), which would mean part of the scheme entering the Pension Protection Fund.”
“The company has also agreed in principle to sponsor a new scheme with modified benefits.”
“Members will be able to choose whether they want to stay in the BSPS, which will then enter the PPF, and so receive PPF compensation, or to transfer to a new scheme often referred to as BSPS2.”
“Details about this new scheme, which is subject to certain qualifying conditions, will be communicated in the coming weeks, and the trustees will conduct an extensive consultation process to help you make an informed choice.”
“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.”
“Community, Unite and GMB therefore recommend that before you take the option to transfer out you should be sure you have all the information you need to enable you to come to an informed decision.”
“Importantly, providing the RAA is confirmed, you will have the option to transfer out throughout the consultation process so you can give proper consideration to this important long-term decision.”
“Community’s approved independent financial advisory firm is Fiscale Financial Services Ltd.”
“Unite’s approved independent financial advisory firm is Lighthouse Financial Advice.”
“GMB members seeking financial advice should contact their regional office in the first instance.”
At the bottom of the page there was another section entitled ‘Transfer value requests: take time to reflect’. It stated the following………
“The Pension Office is currently experiencing high volumes of requests for transfer and early payment quotations.”
“Special arrangements have been put in place to handle these requests, which are being processed in order of receipt.”
“Transfer value quotations are required to be provided within three months of the Pensions Office receiving a request, however every effort is being made to provide figures earlier than this.”
“On behalf of the company and BSPS Trustee, Derek Mulholland, Pensions Director, said: ‘It is very important scheme members make an informed decision after receiving all the necessary information on the options available and taking appropriate advice. A decision to take a transfer cannot be reversed and should not be rushed. The Trustee expects to be writing to all scheme members with further details in July’.”
“We should be clear that the trade unions cannot offer individual financial advice, but if you are seriously considering transferring your pension you should take and act on advice from a reputable financial adviser.”
Pingback: Lighthouse, Quilter’s poisoned acquisition. | AgeWage: Making your money work as hard as you do