The wise Al Cunningham

We’ve only had issue with XPS so far.
If industry thinks a US equity tracker is “Amber” then this deranged and unworkable.
If everything is highlighted as a potential scam then nothing is highlighted as a scam!

— Alistair Cunningham (@Cunningham_UK) September 10, 2022

If you were reading my blogs about the spat between Pension Bee and the administrators of DC occupational schemes will remember that savers looking to combine pots were being sent to MoneyHelper to get guidance where the transfer was clearly appropriate.

The administrators and the scheme trustees , argued that they may not be acting to the spirit of the law but that the law is the law and they will act to the letter.

Pension Bee (and I) argued that there was clear guidance on the DWP’s regulations that promoted common sense above a slavish adherence to broken legislation.

Clearly , the problem persists, evidenced by Al Cunningham’s tweet. That tweet contains a memorable phrase that I will use again.

“If everything is highlighted as a potential scam then nothing is highlighted as a scam!”

There’s no doubt that there is a problem with scams, and no doubt that most of the scamming currently surrounds the promotion of funds that are outside the regulatory perimetre because they are UCIS and not registered in the UK.

But there is a difference between a non-UK domiciled fund and a UK fund that invests in assets outside the UK. Nest has several overseas investment funds, are XPS and others following the legal advice of a coterie of lawyers, blocking transfers to Nest on that basis?

Clearly the Government’s own MoneyHelper site is being promoted to sort out what is a real scam from what is not, but the feedback I have seen from savers is that the MoneyHelper interviews often lead savers to thinking that they are insufficiently prepared to take financial decisions and should either pay for financial advice or stay put.

This week I received guidance from the CEO of the  Pensions Regulator which touched upon this subject

MoneyHelper provides pension and debt specialists who offer free guidance by telephone or online to help people find a way forward. It is a holistic service with financial guidance including information on dealing with debt, benefits, savings and avoiding scams as well as pensions and retirement.

We also know scammers thrive during periods of uncertainty and when household finances are being squeezed. Therefore, it is vital savers can spot the warning signs of a scam and avoid them.

This is why we advise that any staff seeking to transfer money from their pension should be directed to the ScamSmart website. This will help them get to know the warning signs of a scam and check the firm that they are dealing with.

There are two ways that people choose to transfer money from a pension. The first is to get access to cash (typically to pay bills) , the second is to find a better home for their money in another authorised pension scheme.

Al Cunningham’s warning should be ringing in our ears. MoneyHelper does not have infinite capacity , nor does the ScamSmart service. The process of getting an interview and conducting one is both lengthy and laborious, the results are rarely conclusive as it is hard for an organisation that provides guidance to be definitive about a course of action.

Where a saver needs the money, the need for that money may well be to meet the demands of a credit card or payday loan. Some might consider the usurious interest rates a kind of scam but that is of little importance to the person needing to meet a financial deadline. The MoneyHelper debt service may help in other ways , but it cannot advise those with the freedom to drawdown their savings from doing so.

Where a saver is looking to combine money, the best that MoneyHelper can do is to provide factual information as to the destination of the money. Is the new pension scheme authorised by the FCA or recognised as an occupational scheme by TPR?  As for the funds, are they insurance funds (pooled funds) governed by permitted links or are they UCITs, regulated by the FCA. This very limited level of due diligence is helpful, but  it should be conducted by the pension administrator not by MoneyHelper.

The Pension Regulator is also arguing that MoneyHelper should be used by employers who are being asked by staff to stop their payments into workplace pensions under auto-enrolment. This is reasonable, so long as the reason for the referral is because the staff member is in need of  “a holistic service with financial guidance including information on dealing with debt, benefits and savings”

Most of us would benefit from a helping hand with our finances, But once again, the Pensions Regulator goes on to connect people stopping savings with scamming.  Once again, people have the right to pause or opt-out of auto-enrolment and suggesting to people that they may be being scammed into doing so is frankly bizarre.

We risk making savers paranoid to act for themselves. If people are made to feel vulnerable , they may abandon perfectly reasonable plans to combine their pensions, pay their bills, re-organise their cashflows.

We do not operate compulsory savings into workplace pensions for a reason, it is the same reason we do not have compulsory annuitisation and why we have no requirement to take advice on the transfer of DC pensions. Instead of legislation we have regulators whose job it is to ensure not just that harm is prevented , but that people can manage their affairs with ease.

Right now , the barriers facing people trying to combine, drawdown and even pause contributions to their pension pots, exceed reasonable limits. TPR should recognise that scammers are after wealth, not the widow’s mite. The people struggling to pay bills are not the targets of pension scammers who have bigger fish to fry.

We need a better, more proportionate response to the problems people have with guidance. L&G called for a regulated guidance industry last week. Having spent 9 months in the FCA’s innovation sandbox creating a guidance proposition to be used in the mass market, I can confirm that this area is fraught and needs regulatory attention.

We cannot outsource the problem to MaPS and MoneyHelper, we must find a reasonable way forward between ourselves. If we treat everything as a scam, nothing is a scam.