When I was despairing about the very possibility of accountability and coming up with this post, I was thinking of things like this piece from Josephine Cumbo in this weekend’s Financial Times:

Data obtained through a Freedom of Information request showed that since 2018 the Financial Conduct Authority has opened formal investigations into 29 firms and 38 individuals suspected of mis-advising clients to transfer their defined benefit pensions to riskier arrangements.

Around 170,000 transfers took place between April 2015 and September 2018, with a total value of around £83bn, according to FCA analysis. In 2018, it said less than half of the transfer advice it had reviewed had been suitable for clients.

To be clear about this, the FCA’s official regulatory position is that nobody should ever be advised to pull their money out of a final salary pension, like George Osborne said you could in the run-in to the 2015 general elections, because it’s such a terrible deal and only fraudsters would recommend you do it. However, the FCA has only managed to do anything about 67 of 170,000 cases. £83bn has been stripped out of the pensions infrastructure and sent God knows where and, well, that’s too bad.

Although, this is a clue:

Of the 2,426 firms providing transfer advice during the period reviewed by the FCA, 1,454 or 60 per cent of the total had recommended 75 per cent or more of their clients to transfer. At the time, there were more than 6,500 pension transfer specialists working across the market.

Yeah, the financial advisers involved tended to recommend all their clients do it. Because, you know, moving a £83bn pool of capital is going to mean some fees!

The whole story is grossly appalling, from the brute fact that Osborne’s “pensions freedom” dropped just in time for the election – what was Cx, the political chancellor, thinking? two guesses anyone? – to the Lib Dem minister who said on national television that you could spend it on a Porsche if you wanted, all the way to the hustlers working the streets of Port Talbot trying to scare British Steel retirees into cashing out their (excellent) retirement provision by saying the fund was going bust. In fact, it was the activists from South Wales who eventually got the FCA to take what pitifully little action it did.

And as far as I can see this enormous crime has just settled down to mature under a pile of other monstrosities. Also, when I searched for the Cumbo article I got this: an ad for the FCA placed directly next to an ad for cashing out!

4 Comments on "Rotten"

  1. Wow. I got some Independent Pensions Advice a few years ago, and was very firmly advised that if I was lucky enough to have anything in a final salary scheme I should leave it there (& fund it some more if I could). Looks like I was lucky.


  2. I’ve been operating on the basis that all financial advisers were shysters since the head of a company that had sold me an endowment mortgage told me that switching to a repayment mortgage was foolish, since it was impossible for an endowment mortgage to fail to pay off the loan. I made sure he really meant “impossible”, rather than “unlikely” which he was clear about, and then told him that I could no longer trust a word he said.

    I have a general rule: don’t trust men in suits to be attached to reality, and don’t take any notice of their commitments unless you already have the goods or the money.


  3. «And as far as I can see this enormous crime has just settled down to mature under a pile of other monstrosities.»

    This is a smaller-scale repeat of the earlier similar monstrosity (the one centred on The Prudential), and if I remember well “The Economist” and others described it like this, and I think this is plausible:

    * Many people were advised to switch from DB pensions to individual share based pension accounts by advisors who would receive a commission of 30% of the transfer, resulting in a pension of around 30% lower (and riskier) than otherwise.

    * The advisors did not disclose that 30% of the pension would go to them, and it turns out a legal technicality is that pensions are a type of insurance contract, they are subject to the “utmost good faith” principle, which applies to both sides in an insurance contract (even if usually matters only for the insured).

    * Since it was a violation of “utmost good faith”, this was insurance fraud, and easily proven because of the extensive paper trail, and at the minimum the transfer was void and had to be undone, and this required for 30% of the amounts to be paid back to the pensioners.

    * But that 30% had gone to the advisors, and they were refusing to pay it back. Since it was insurance fraud they could have been prosecuted for that, and it would have been open-and-shut cases because of the documentary proof.

    * However it turned out that 60% of Conservative local association chairmen were financial advisors, and pretty much all of them had persuaded pensioner to do the transfer and pocketed 30% of their pensions.

    * The government than realized that prosecuting (and convicting) for fraud a large majority of Conservative chairmen would look like a political move, and decided not to prosecute them, and asked the insurers to pay out that 30% themselves, to cover their agents.

    * But the insurers argued that paying out that 30% would bankrupt them, and they would have to rescued by the government, and this would blow up the PSBR. Also their bankruptcy would cause their share prices to go to zero and this would upset many affluent savers making them vote for the opposition.

    * So someone found out another legal technicality about assurance contracts: that any claim on them would extinguish with the death of the insured, and obviously most of the insured were towards the end of their lives.

    * Therefore the government set up a process by which the victims of that fraud could apply for a refund of the 30% from the insurers, but designed it so it would be a very, very slow process, and many if not most of the pensioners dies before it would finish, thus saving most of the cost to the insurers.


Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.