Yesterday’s post on Pension Bee’s frustration with master trusts behavior – (blocking transfers under the guise of safeguarding) has solicited a flutter of tweets asking questions about Pension Bee’s motives and practice. I’m happy to answer some- as I have a good relationship with Pension Bee and feel they have much to offer people who want to combine pensions to get a better retirement income.
After publishing news of the Pension Bee letter of complaint sent to Guy Opperman, I received a number of mails from providers, including this statement from a “spokesperson” from B&CE
“Our lawyers have instructed that some of Pension Bee’s marketing initiatives fall outside of the new regulations. The regulations broad reference to ‘incentives’ means that any transfer which has been incentivised cannot proceed as a statutory transfer.
“We believe we are one of a number of providers to receive advice similar to this, and while we appreciate that the legislation may not match the policy intent, our Trustee must apply the law as it stands.
“We have been in contact with Pension Bee to find a way forward in the best interest of our members who wish to transfer, and we have taken a number of steps to explore alternatives. The additional checks we are having to undertake in no way prevent our members from transferring their funds.”
B&CE, which runs the People’s Pension, is the worst offender when it comes to waiting times. According to Origo, two years ago it took an average of 12 days to transfer from the scheme (one of the country’s largest workplace schemes with more than 5 million members), but now it is nearly 30 days.
XPS, Cushon, Arc (legal advisers to Cushon), Railpen and Creative are quoted on the above link. They are unanimous in blaming the law for putting them in a position where they have to block transfers on the basis that a member may be scammed by a SIPP provider using incentives in its marketing.
Incentives are generally used to market non-workplace pensions (e.g. Sipps).
The non-advised market is dominated by a handful of powerful brands. AJ Bell, Hargreaves Landsdown, Wealthify (now part of Aviva), Interactive Investor, (now owned by Abrdn), Nutmeg (owned by JP Morgan) , Penfold (recently receiving $8.5m in private equity) and Wealthify (owned by Aviva). Here’s evidence that all these providers are offering cashback or similar incentives:
There is nothing wrong with incentives which are legitimate financial promotions overseen by the FCA. A fundamental purpose of non-advised SIPPs is to bring people’s pension pots together so they can be better managed and provide a reasonable retirement income.
Here is a list of the 40 best refer a friend schemes – they’re standard industry practice. Pension Bee’s incentivises people to pay a contribution into an account, that contribution can be from a transfer or from a bank account – it’s a savings incentive.
The FCA’s retirement income study shows that small pots get cashed in but bigger pots (£30k+) are used to provide income. Consolidators advertise the value of what they are doing and master trusts also advertise the virtues of consolidation. This includes the People’s Pension.
Would you regard this web page as an incentive to transfer?
Two questions arise from looking at these promotions
- Why is Pension Bee being singled out for offering incentives?
- Do Regulations require Occupational Schemes like Master Trusts to start throwing red flags.?
(5) There is a red flag present where the trustees or managers of the transferring scheme decide that—
(a)a person without the appropriate regulatory status has carried on a regulated activity for the member in respect of the transfer in breach of section 19 (the general prohibition) or section 20 (authorised persons acting without permission) of the 2000 Act;
(b)the member’s request to make the transfer has been made further to unsolicited contact for the purpose of direct marketing of the transfer;
(c)the member has been offered an incentive to make the transfer; or
(d)the member has been, or considers that they have felt, pressured to make the transfer.
It’s worth pointing out that the decision whether to delay transfers and refer consumers to MaPs is at the trustee’s discretion and that there is a difference between referring a friend to take out a pension and incentivising a transfer.
In my view, none of the promotions above are targeting transfers, they are aiming to win market share. This is a question of competition which Pension Bee are – rightly in my view- claiming is being used to obstruct the consolidation of people’s pension pots.
Pension Bee and safeguarding
There is a second accusation made against Pension Bee. That it is allowing people to make their own decision on whether to give up “safeguarded benefits”.
Recently, Pension Bee introduced to some customers , a facility to opt-out of safeguarding. The onus is on the customer to choose not to have this protection, just as I can choose not to have anti-virus on my computer. (I had until recently too much anti virus software to allow my computer to operate at speed. I feel I now have the right balance – I am aware that I run a risk – that risk is proportionate to the reward – for me).
I think it unfair to criticise Pension Bee for including this option, it is a member choice which speeds up transfers – but it is not the default. It is important to note that this option is given to customers who have indicated they have their policy paperwork in their hands and are therefore able to decide if they wish to check for themselves and therefore expedite the process.
Again, comparisons with competitors are important. Most non-advised SIPPs require savers to sign a disclaimer as part of the Terms and Conditions which makes them responsible for the loss of safeguarded pensions. Ironically, Pension Bee are providing guidance on this as the default, going beyond market practice and showing “best practice”.
People may sympathise with master trusts as being caught between a rock and a hard place. But Pension Bee are saying this is too kind. They are saying that master trusts are actually using the regulations to hang on to money longer than they should. This is particularly the case where the safeguarded benefit is the right to a protected minimum retirement age of 55. This benefit directly contravenes the government’s intention to raise pension access ages to 57 yet it is being cited by People’s Pension as a reason not to take money from them. This is the reason that People’s Pension withdrew from the member exchange trial earlier this year (leaving only NOW and Smart to test data exchange).
More importantly, the vast majority of the pensions industry has not taken this interpretation and it is mysteriously only pension providers with a track record of slow transfer times or indeed unpublished transfer times that routinely push paper to effect the movement of consumers’ money.
The same questions arise
- Why is Pension Bee being singled out for offering an opt-out of safeguarding guidance?
- Why Regulations require Occupational Schemes like Master Trusts to start throwing red flags.?
Paranoia about overseas investments.
Paranoia about Pension Bee extends to its global equity fund.
Read in the Times about the harrowing experience of Rob Dyke , who twice needed to be interviewed by MaPs before he was believed that he wasn’t being scammed by moving his pot from XPS administration to Pension Bee.
Dyke, who works in technology, changed jobs at the start of the year and in February requested that his pension pot with XPS, which he had built up over two years, be transferred to his personal pension. After a month passed without hearing anything, Dyke chased XPS. He was told that he needed a phone interview with someone from the government’s MoneyHelper financial guidance scheme, but that the next available slot was in April. He had to get guidance because an “amber flag” had been raised over the transfer, meaning a potential scam was detected….
During his guidance call Dyke was asked why he was moving his pension and where to. He was also asked if he had been given assurances that his new plan would not have offshore investments….
“Most of the questions they could have answered for themselves. They kept repeating stuff in a similar way and some questions were quite leading,” Dyke said.
“I understand the need to protect against scams, but surely XPS can look up PensionBee and see that it is an accredited provider.”
Dyke waited about three weeks before chasing XPS again. He was told that MoneyHelper hadn’t been fully convinced he wasn’t being scammed, and that he needed another interview.
Dyke’s main pension pot is invested in shares and bonds from around the world, like most investors. He thinks that confusion over these global investments must have been the cause of the amber flag, but is frustrated at the delay because PensionBee “doesn’t even offer any of the ‘offshore investments’ that you would be concerned about”.
Dyke has complained to his previous employer, made a complaint against XPS Pensions, and is considering going to the Financial Ombudsman Service, a resolution service for complaints against finance firms. He said: “It seems like at every stage they have made it really hard for me to leave their plan. They have £30,000 of my money, and I want it invested how I want.”
Dyke’s mistake was to want to invest with Pension Bee that has a global equity fund. In case you missed the point, almost every master trust default is primarily invest in global equity funds.
- Why was an amber flag thrown?
- Why was Pension Bee singled out?
Pension Bee as a place for value for money
A third charge made against Pension Bee is that it is offering less value for member’s money than were money being retained in an occupational scheme (typically a master trust).
Pension Bee’s charges are typically higher than those of master trusts for low balances and can even be higher for high pot values. But even here, you cannot generalise. Many master trusts with fixed charges are still eroding their customers’ pots close to £0 and are expensive, especially for the small pots they are likely to administer; illustratively a £1.50 monthly charge is 1.8% of a £1,000 pension.
Our analysis of Pension Bee’s charges suggests that its charging structure is consistently competitive and (for very large and very small balances) very competitive indeed
But that is to miss the point, so long as the only criteria for assessing VFM is charges, then Pension Bee , like any other provider , will have difficulty claiming it is offering “improved VFM” for all.
However, Pension Bee’s returns, as measured by AgeWage, have consistently been high, when measured against the market benchmark. We see Pension Bee scores well above 50 on our AgeWage scale, even taking into account higher charges. So Pension Bee is adding value to most of their customers where it matters most – in the back pocket.
And Pension Bee are offering a high quality of service, as measured by its public, which is why it is becoming one of Britain’s pension success stories. You can judge for yourself by subscribing to their emails or even taking out a SIPP with them. They publish their trust pilot scores which are consistently high, the quality of service is what leads many to pay more for their transferred money.
The same can be said for many SIPPs , advised and non-advised. Based on the returns and service rather than just the price, Pension Bee is offering value for money- people are taking decisions on value not just price. That is how most people make purchases.
- Why is Pension Bee being singled out for high charges?
- Why aren’t SIPPs being assessed for value rather than just on charges?
Should we blame Government legislation?
In one of the most read discussions on my linked in group, top pension lawyer, Jade Murray argues that occupational schemes (master trusts) are only obeying the law and protecting themselves from future claims from former members.
It is very difficult, if not impossible, to reconcile a 10 day transfer time with many transfers to personal pension schemes as the new transfer regs. are poorly worded and put transferring schemes between a rock and hard place.
If you want better transfer times, you need to change the regs. and resolve the tension between speedy transfers and scam protections. The problem with “small financial incentives” is that it is a red flag – full stop.
If schemes ignore it, then they are wide open to “hindsight” claims from members if they later have a reason to be unhappy with the scheme or investment they transferred into. The Pensions Ombudsman has been very happy to penalise transferring schemes where they have transferred people in circumstances where they didn’t have a statutory right to a transfer, and then something has gone wrong in the receiving scheme and the member has complained.
The new laws are not fit for purpose and need changing.
But trustees are just as likely to fall foul of the rules by delaying transfers as by expediting them.
The tension is not just between schemes and the Pensions Regulator, It comes from Ruling (DRN3024818), from the Financial Ombudsman Service
This ruling is against Utmost (Equitable Life as was) where the complainant suffered financial loss through not being able to move money
In my view, Utmost did not deal with Mr B’s request to transfer in a timely way. I‘ve considered whether the delay arose directly as a result of the unprecedented world events of a worldwide pandemic that were unfolding at the time. However, I can see that the information request made by Company A was received by Utmost on 11 March 2020, before the national lockdown. I also agree that a more usual timeframe to deal with a
transfer request of this nature might be around 10 working days. Mr B says his transfer request took 29 days from start to finish.
People may sympathise with master trusts as being caught between a rock and a hard place. But Pension Bee are saying this is too kind. They are saying that master trusts are actually using the regulations to hang on to money longer than they should.
The consumer detriment that arises from not processing legitimate transfers can be high (as Mr B and Rob Dyke found out), trustees are not necessarily de-risking their duties, by following the path of People’s Pension and others.
Why should the master trusts obstruct transfers?
I think the answer to this is obvious. No-one minds the quick settlement of a bill they issue but no-one is as keen to pay bills submitted to them. Transfers are effectively bills issued by policyholders or members to their providers for the forwarding of their future entitlement to a third party. What is there for a provider to like about that? What is the incentive for a provider to assist in the speedy transfer?
As shown above, the master trusts are competing for consolidation business themselves (almost all offer a consolidation service). They see net outflows to SIPPS (just as Australian Supers see net outflows), because the SIPP is an attractive option for those who are wanting to manage their affairs. Master trusts find it hard to accept that for many members, the retirement options within master trusts are inferior to those of SIPPs.
In the convoluted world where price is the only factor in transfers, master trusts may argue that price is on their side and that they are right not to give away value let alone allow the loss of “safeguarded benefits” such as the right to a protected minimum retirement age of 55. They can point to MaPs own investment pathway comparison site and argue that it uses purely price comparison to rank pathways. Organisations that try to help people to take decisions on the basis of “value” are constantly at risk of being cited for giving advice. Master trusts like People’s – which are low-cost, cannot rely on price alone.
Red flags are being thrown without consistency and often on the spurious excuse that transfers rather than products are being incentivised (something quite legitimate when enhancing CETVs).
The interference of trustees is likely to prove counter-productive as word gets around of what is likely to be seen as abuse of fiduciary duty.
We need a pensions Dyno-Rod
The reality is that the free-flow of money at the command of the people who own it, is a greater right than the fiduciary duty to protect members from scams, safeguarded benefits and higher charges. There is surely no excuse for blocking transfers to legitimate UK SIPPS that meet the two conditions laid down by the DWP. Members have rights.
Pension Bee are using the same marketing tools as other non-advised SIPPs , they are not (in my opinion) incentivising transfers, they are offering value for money, they do offer an enhanced guidance service for safe-guarded benefits and they are a hugely successful new SIPP much admired by investors and loved by clients
We need common sense , not pensions legalities, driving the process. If the dashboards are going to be meaningful, they will need to facilitate the consolidation of pots without the kind of chicanery that is going on. Read this article in the Times by Imogen Tew to see further abuses of the transfer regulations by reluctant occupational schemes
Pension Bee are right to call out bad practice and call for a 10 day standard for transfer times. Too much safeguarding is blocking. Trustees should stand up for their members not hide behind lawyers and We need a pensions Dyno-Rod. We need Pensions Bee and a few “disruptors” like them.
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