Category: News and Updates – Pension

Money – The Inner Game – The Romans

So What Did The Romans Do For Us? 

Of course, most of you will recognise that as a line from Monty Python’s  – Life of Brian and the scene where a group of men are discussing the struggle against the Roman empire and doing their very best to find an angle to ‘really hate the Romans’ – but only really finding positives. 

Fact is the Romans did work out a lot of stuff. Like how to make really hard concrete for the foundations of buildings, then the drains, the public administration of large areas of land and people.  

They left a large legacy, some of which is not as positive as they would have hoped but one that contains lots of useful pointers for modern life.  

Some of their writings have been preserved and of course, that brings me to the Stoics, the Roman philosophers that tried to give us some answers to life and some tools to use. Remember life was short in Roman times, and few people survived much after fifty.  

It was about ten years ago when I first started to become interested in some of these lessons. I was in the middle of writing a few words for someone’s funeral and I remembered the word stoic, that started my initial interest

With that in mind, and with some focus from me, it was Epictetus wrote few lines about “protecting your own good” Ryan Holiday in his book The Daily Stoic interpreted this as “protecting your own flame”.  

For me, this put in a nutshell what I had been trying to explain for years – inside of us there something that needs preserving, needs to be protected and kept alight (or alive) at all costs. Many of us don’t identify it until it is too late, some of us find out what it is and don’t even recognise it and for others they find it and focus on it. 

They make it brighter and brighter until it eventually dies – as humans we do all eventually die – life really is a terminal illness. 

On the way to brightness everything changes, us, the world, opinions and actions. This thing inside of us – once discovered becomes the thing that brings us everything we desire from life. 

There is little from the outside that can bring us true happiness, the emotion of being at peace knowing what you are doing is truly engaging, truly your best work is you finding the flame, once found you need to tend it over years, it is the one thing you and I need to do consistently.   

To help with keeping that flame alight is knowing how this money thing works and making sure whatever money you have is working hard for you, it brings you freedom to focus on it. It’s not about the money, it’s not about achieving true wealth but is all about having enough for you to become free enough to focus that which truly matters.

Sure my money principles may well end up making you richer than your wildest dreams, the problem is most of the stupidly rich people I’ve met are arseholes and miserable with it. Very few have a true focus on their internal flames.   

Knowing how to make your money work for you and understanding how that will help you keep your flame alight is one of the most important things you can have and do.  It’s not complicated, there are only a few rules to it.  

But, for a few moments think of all you could be and do, if you could take your nose off the grindstone for a day, a week or a month. You’d be amazed and the happiest you’d ever been.  

We can thank the Romans for some of these ideas and much of our modern way of life and don’t forget to include all of this inner game stuff – look after your flame – and remember it was the Romans who worked it out first. 

Recent Articles

Pensions

Pension Select Committee – My Response

You can contact me here

Pensions – Pension Planning – Don’t Buy The Hype.

The pensions industry lobby’s central Government hard for more pensions. Every change of Government means we get further changes to pensions, more legislation, different treatment, some minor alteration. 

The industry loves all of this because it mystifies pensions, makes them more complex in the eyes of you – the consumer. In fact an entire industry lives off the back of you not understanding what is going on, not having the 10,000 hours to become proficient in understanding your own money, your own pension. 

And then there is the option of a personal pension, defined benefit, defined contribution, Stakeholder, Auto Enrolment, drawdown, Sipp. The list it seems is endless and not all of them apply to you. 

With that in mind we have a situation with pensions, the thing that is designed to support you in the longest holiday of your life, but the thing that seems more out of sync than ever.  

The tax breaks offered from pensions are not what they seem, Gordon Brown and his tax raid on pensions a few years back seemed to be the last straw, if you are a basic rate taxpayer then pensions are tax neutral at best.  

See, you do get tax relief on your contributions – but your final pension is taxed when you draw on it. It’s likely that your final pension pot will be larger at the end than when you started it – meaning the amount of tax taken from your pension will be more than the Government gave you tax relief. You didn’t read that in the sales blurb did you? 

It’s also likely that as a higher rate taxpayer now and benefiting from higher rate tax relief on your pension contribution you will be taxed at a lower rate when you draw on your pension. So, pensions seem to make a bit more sense for you.  

If you don’t pay into a pension it’s likely you will also miss out on your employer’s contribution and or if you are lucky enough to work for a Government department you may have a final salary pension scheme – which is very valuable.  

Before you rush to invest in a pension and before you consider your options there are a few things to bear in mind. 

Any tax relief offered by pensions will either be lost in charges, pensions are not managed for free or clawed back as taxation when you finally draw on your pension. Of course, that doesn’t mean you can invest for free (not anywhere) but it does mean that you’ll lose the flexibility to move your money – pensions can’t be moved like a current account. And the provider levies charges from now until then – whenever then is.  

Some Options 

You can invest tax free buy using your Individual Savings Account (ISA)  allowance every year (£20,000 as I write) and your Capital Gains Tax allowance is £12,000 (19/20) which means you can invest £100,000 and get 12% growth on that investment virtually tax free add the ISA allowance and £120k tax free is the final sum available to you. Of course, it could be more. 

When comparing pension savings, you need to consider the following. 

Cash paid into a pension is held until retirement. From age 55 currently. You have no access to it; you can decide where to invest but you can’t get access to it. Charges will be deducted every month on most funds. 

So let’s compare that with the options. 

You have the option of reducing the debt of your Student Loan, current interest rates on these could be as high as 5.4% (Feb 2020) for those of you classed as higher earners.  Average pension fund returns (6% before product charges meaning you’ll need to get at least 4.4% return on your pension fund at a 1% charge to be better off).  

Note. 1% charge. Be lucky if you have one this low. Also 4.4% return, below average – but then so are half of the UK’s pensions funds. 

Perhaps, if you have credit card or personal loan debt you could reduce this instead of paying further into a pension. Average Credit Card interest in the UK is around 20% pa. Personal loans around 8%. Both are substantially higher than the 6% long term average (before charges) pension fund performance. A sure win for reducing debt. 

You could also reduce your mortgage to nil or save a deposit for a house (renting long term is more expensive than home ownership) if you are in business then putting your ‘pension contributions’ into stock for sale, means you could be getting a 20% return this week instead of a return inside your pension fund. Both of which are likely to prove better than pensions.  

Bottom line here is you have options, pensions are not the panacea, the one thing you should consider.  There are lots of options. One is inflexible, constantly being fiddled with by Governments. The others, fully in your control and that makes financial sense.  

I’ll leave that with you.  

Want some more? My free course is here

www.moneytrainers.co.uk

Contact me

All Successful Businesses Do This – same applies to people.

You may have noticed that people with wealth are all around us, there are millionaires being added to the population all of the time. Some businesses are more profitable than others. You can even compare identical businesses that are managed by individuals and get two answers about how good that business is – with one complaining it’s never been good and the other stating that business has never been as good as it is today. 

There are a couple of things you’ll notice about this. If others have managed to become wealthy, become financially independent, why can’t you? And, the information a business needs in order to become profitable and easy is out there, either in books or on the internet, possibly even on TV programmes like the Apprentice and Dragons Den all of which provide a fairly high level of guidance and help, provided you listen. 

On an individual basis people like Warren Buffett, born into pretty humble life, certainly not what you and I would call wealthy. The likes of Duncan Bannantyne (love him or loathe him) from the streets of Glasgow shortly after the war. Both are examples of ordinary people becoming wealthy beyond their own wildest dreams simply by following a handful of processes – what I call principles.  

These processes can be followed by anyone. Of course, I couldn’t promise you riches beyond your wildest dreams just buy following the processes but I can assure you if you follow the rules you’ll be much better off than by not following them. Those of you lucky enough to continue learning, adding to your own skills will find the same principles one of the best places to start. The rest is up to you. 

There are no get rich quick schemes that work, sure you may bump into a few people who’ll explain there are – snake-oil salespeople have been around since the time of Jesus – a bit like the Bitcoin resellers of today. There are few if any of these schemes that ever work – because they don’t use the money principles that rule in the game of wealth.  

So what is it that successful businesses (people) do that makes the difference in the end? 

  1. Keep an eye on profit. Spend less than you earn, focus on cashflow. 
  1. Look after what you have. Customers, existing investments, relationships. 
  1. Always focus on the 20% of things that work best for you and avoid spending any time on the 80% of things that don’t make a difference. 
  1. Always invest for income, if your business is buying in stock for resale, make sure they are priced for profit. If you are investing your own money in stocks and shares, make sure they are income producing. Capital growth means that you are hoping to sell that share, at some stage in the future, at a higher price than you have just paid for it.  

Becoming wealthy, having a great business is as simple as following a few principles – the Golden Rules as I call them. Provided you do, then some form of financial success is guaranteed, sure you may not end up ‘richer than God’ but you will end up in a position that is far better than the one you are now.  

 By the way, I’ve met God, he’s a divorce lawyer in London. 

When you are ready to get a shimmy on with some of this money stuff, get in touch. Or at least get access to the ‘free money training’ in the link below.  

Free Money Course

Related Links

Do These Things

Pension Selection Committee – That Told Them

Money, life – change it.

You don’t have to live like it, indeed life really isn’t like that anymore. Jobs for life have sadly gone, the security of jobs has long gone and if you are waiting for Government to change things for you – let me ask, how is that working out so far for you? 

My idea behind this is to show you how you can get your personal finances in order in a really short period of time – like 90 days.  I not trying to be all ‘salesy’ when I say that, to show and explain that if you follow some simple steps, the principles as I call them, free up some of that ‘negative mindset’ and you can move your financial life forward  –  take a little action and then things will start to change for you.  

One of the big lessons I’ve learned is this – spend a pound today and it never comes back to you. It is lost forever, gone and never to be seen by you again. It’s off building the capitalist system and will work for someone else in the future.  This is money that you’ll probably have traded part of your life for (worked for it) and it’s something you should understand before we move on, once spent money never comes back, its value is transferred. 

As soon as you start to consider your money as a valuable resource that should spend all of its time working for you instead of you working for it – then everything starts to change.  

I hear all the time people moaning that they don’t understand it, just can’t work it out, how confusing money really is. In part this is what the ‘money industry’ has done to you, the banks and advisers are all tied up in this money business – as soon as you the consumer starts to understand that there is a different way, a clearer way of really understanding this whole money thing – without the advisers and banks getting involved – their business is over and you and I are in control.  How will that be? Thanks for reading – that’s my goal. 

We trade our time (our most important resource) for money, that we then either squander it or pass it on to specialist adviser or organisation and hope they will be able to manage it better than us. Well that is mad and the evidence is overwhelming that they don’t, every business whether they are a bank of finance specialist are there for one reason – to make profits offering services – profits from your money. With that in mind, here is the question that I ask all of the time. 

“If the financial advice industry had the answers to solving the long term problem of making money work them – you’d never get in to see one, you would be lining up for months waiting for an appointment – they don’t have the answers all they have is hope, that is what they are selling. If advisers could make money work properly, they’d do it for themselves first and retire at 35 – instead, they are all still working.” It’s the same reason truly wealthy people ignore things like pensions, why the likes of Warren Buffet doesn’t rely on advice in order to make his money work for him.  He just learns what he needs to know – then does it.

When you start to see your money as a valuable resource that just needs to be working for you instead of working for someone else everything changes. The little things, the cost of a coffee, for example, could be as high as forty minutes of work if you are working for minimum wage.  

That money will never come back to work for you again and you will never, ever get the time back that is now gone forever. 

January 2020

Money – it’s a long term thing.

When I was growing up [1970’s] you either had to be a movie or tv star or have inherited wealth – I don’t remember business being a thing. Of course, I am sure that’s not right, there is plenty of evidence to suggest and support that there were business owners that made money during this period (Alan Sugar seems to be one).

Instant riches could be had by winning the Football Pools – 8 score draws from ten seemed to ring a bell – never really understood gambling. Now, we have the National Lottery – something like a 58 million to one chance of you not winning – yet still, people play in the hope of a big win.

Those that do win big, don’t tend to hang on to it for long – with three to five years of living the high life – before it’s all spent. It was the same with the football pools all those years ago.

Instant riches seem to vanish as quickly as they arrive, and there is a reason for that. Money needs to be managed, having money is a responsibility, it takes time to learn how to work with it and how to get it working for you.

When you can have anything you want, there is a human tendency to have whatever you want and to have that now.

For most of us the only thing that holds us back is the lack of cash, a quick win would seem to solve that problem overnight. Result, drink, drugs and unhappiness soon follow. That is the pattern and our history is littered with stories about people becoming wealthy and losing it very quickly.

Fact is, money – having a lot of money is a burden of a kind.

Also, the fact is not having money is a burden of a kind – only I suggest that not having any money is more of a burden than having it. I don’t know – without some perspective, it’s hard to work out which is the worst (Christina Onanis, her bio was called ‘all the pain money can buy, which seems to indicate that money is not always a positive thing).

With that in mind, and based on my experience with money and managing it for clients is this.

Bad money habits creep up on you – you could be a millionaire but if you overspend for any period of time you will soon end up in the poor house.

Spending hard-earned money on stuff that goes down in value is one sure way to the poor house – stuff is tech, cars, partying – none of this goes up and value and you have to trade your life in order to obtain them (it’s called work).

Your money must work for you, a sure-fire way to end up unhappy is to invest in things that don’t pay you an income. Markets fall and rise, there is no real way to time your purchase of an investment and it’s future performance is always out of your control – if you buy shares in Microsoft today – you are hoping you are able to sell them back to the market for a higher price at some stage in the future.

Reality is, all of this takes good habits, discipline and knowledge of money principles.

This is what I teach over here at MoneyTrainers.co.uk along with a number of happiness principles – that one day will be taught in all schools.

When you are ready, get on my email list for updates and news along with discounted products and events.

Until next time.

Richard

PS You Can Borrow My Brain – One Stop To End Financial Madness

August 2019 – Podcast in the Park.

State of the markets

Brexit, recession, trade wars.

Options

If you have cash invested you can

Buy on the dips

Invest for income

Invest with the lowest charges

Always have cash on hand.

Buy Cheap 

Invest for Income

Income Paid                                    Re Invest

Spend less than you earn.

FIRE Movement

Would you work 80 hours per week in order to retire at 40? That’s one solution.

What about an extra 13 hours per week? If you do your income will increase by a further 30% or so. Sure, if you are working two jobs already then you may need to think about alternatives to working harder – working smarter.

Getting new skills, find the time to watch Youtube videos, to look up stuff online, the more you know the more you are worth.

Possible September

80/20 – this is an important rule

Basically, in terms of becoming wealthy at some point in the future, in order to be free, have freedom from work you need to do a number of things.

Get your money working for you – it accelerates the process – you only have so much time to work and earn – that’s why making money work is so powerful.

Next ignore all the information you are told about investing and making money – there are only a small number of things you need to do, need to be aware of in the scheme of 80/20  only 20% of things you think are important are.

Everywhere where you look you are told what. What you should invest in, how you should manage your money – you are told the why is important – the reason most of you are told this is simple marketing. 

For most financial advisory businesses you are told to invest – because thats good for them, they enjoy a small percentage of your investment for ever – thats how their businesses are worth so much. That is not the right way to become wealthy. You will never be rich while someone else is taking a slice of your income/capital.

In the case of pensions the provider and the advisory firm will get paid from the time the plan starts until death  – in many instances.

The why is always – at some point you want to stop working and enjoy your cash.

Fact is within 80/20 there are some answers.

  1. You only need to focus on a couple of small thing, easily understood and manageable things  in order to transform your financial life.

Invest for income, make money work for you – you can’t spend capital which is why income is important. hold money in cash first, invest when the market has dipped, invest in low charge flexible products – etf’s and tracker funds. Invest for the long term, reduce/manage debt/ use tax allowances.

  1. Ignore the complexity or those things you don’t understand.

Many things in financial planning are complicated, Inheritance tax, tax planning, capital gains tax – complicated offshore rules – these are the many complicated things you don’t need to be aware of  – for now. 

If you are looking to genuinely start making your money work hard for you then focus on the things you can control and ignore those you can’t.

Pensions – James Brokenshire

Made me laugh today, James Brokenshire has suggested that we be allowed to draw money from invested pension funds in order to help purchase a main home. Immediately the pension industry ‘kicked off’ with screams of no, not acceptable with plain dismay that any member of Parliament would dare suggest it.

Fact is from a financial standpoint it makes perfect sense. Your main residence enjoys tax free growth and a good deal of tax breaks on sale – it’s also a sound investment in relation to Inheritance Tax.  But for first time buyers there is a need to get hold of around £30k in order to purchase a first home – and if people are paying rent – this is of course paid from after tax income which is effectively double taxed by Government  – as landlords declare the income received – another reason why the system favoured Buy to Let – until of course it got out of control.

Here are some of the reasons why the idea of James Brokenshire is a good one, but they are not new. My book “The Great British Pension Swindle” covers things in a lot more detail (Amazon)

Renting your own home.

If you earn £26,500 per year your take home pay (April 2019) will be £21.555 basically means that  in order to get £800 per month rent after tax you need to earn around £1000 before tax in order to pay that.

Of course the same applies to a mortgage – but if you are paying a mortgage at some point the costs will cease. It therefore makes sense to buy instead of renting. Please note that renting also brings a good deal of flexibility so buying now may not be the best idea.

If we consider average mortgage interest rates, you’ll note that they have not always been low and the long term average is considerably more than the rate your lender offers you now. In fact somewhere around 4% is the norm, but of course have been a lot higher in the past.  As interest rates increase (which they will) you’ll need to use up more of your tax paid income to support it – but the same applies to rent.

Graph supplied by www.staratista.com

Pension Fund Performance

If you compare investment returns over the long term you’ll note something that doesn’t quite add up. Of the 14496  funds listed on Morningstar.com – Pensions (http://www.morningstar.co.uk/uk/lnpquickrank/default.aspx ) most don’t have any long term fund performance or the performance is well under par.

Of these fourteen thousand odd funds few show performance over the longer term, they change names, consolidate with other funds or just disappear. The cynic in me thinks there may be a reason for this.

Back to the problem.

The Aviva fund, this is the fund that’s returned about 1% per year before charges, an above average fund – they is one of many thousands that are just not delivering for you the pension consumer.

It has returned 10% over ten years – 1% per year before product charges – which will be at least 1% if you compare historical charges, there are many pension products charging more than that making it a lot worse for you. Do you know how much your provider is charging you – average fund charges and an average pension fund mean the charges are likely to be more than your council tax.

Even with a well above average fund performance you would have actually lost money – but of course still paid charges.

The winner here is the pension provider. Investing in pensions means you will probable lose money investing in pensions over a ten year period – unless you chose a low cost provider who can offer good future returns – let me know when you find it – got a ton of people who’d love to have one of them. The other winner is the Inland Revenue – the tax relief they give is returned when you draw on the funds.

Importantly, if you borrowed less on your mortgage I can guarantee you’d be better off by at least the interest charged by your lender  – pensions ain’t looking so great now are they.

The entire industry is doing it’s utmost to convince you the figures are wrong, yet as James Brokenshire has admitted – you may of course be a lot better off not having any funds in the pension – and it’s the industry that’s not telling the truth.

Invest in pensions, but sleep with one eye open – they are not what they seem.

Links

Watt Financial Solutions – old but damning evidence of a lot ten years.

http://wattfinancialsolutions.co.uk/documents/The_Lost_Decade.pdf

https://www.statista.com/statistics/386301/uk-average-mortgage-interest-rates/

https://www.thesalarycalculator.co.uk/salary.php

May 2019 Podcast

Lots in here. If you ever wanted an investment plan, something to focus on. Something that works, then it’s in here.

Investment secrets

Recording this on Tax Freedom day which is when we officially start working for ourselves having paid our income tax for the year. This year is the latest day it’s ever been which means we are now at the highest level of personal taxation, ever. Which is why the information I share over here at Moneytrainers.co.uk is so important.

Don’t expect Government to start making changes that will be in your favour just yet.

Business works based on income. You wouldn’t set up a business if the sole intention was the hope of selling it at some stage in future for a handsome profit.

Iturr has to be all about the income, that’s how we all pay bills and live – based on income.

Investments that are sold to you or advised for you to have  are nearly always based on growth and not income – income is out of vogue, sees like it is old fashioned  – but it is an investment secret of the uber rich.

Growth is not guaranteed

Can be taken away at any time

Riviera – soap on Sky Atlantic

    Uber wealthy

    Lives based on income

Buy to let – dead now – but based on income.

Income is a ‘wealthy strategy’ – becoming rich over a life time is about investing for income.

Bonds – Income ETF – High and Low risk Company bonds.

Investing for growth is  a ‘betting mentality’ hoping for great rewards if the bet comes off, reality is they big winning bets are rare.

True wealth is not about working for money it’s about working for money once and then letting that money work for you.

How does this work in practice.

Applying the above strategy to pensions and other investments is easy.

Same with ISA’s.

Tax free allowances are to often ignored – like capital allowances

ISA allowances are important

Pensions less so for the following reasons.

  1. Charges
  2. Adviser involvement
  3. Changing legislation
  4. Limited investment opportunity

We are now in a golden age of investment and personal choice.

Not putting all your eggs in one basket.

Buy my book – The Great British Pension Swindle it’s got a full five stars on Amazon.

March Update – Pesky Spam Filters

Pension Select Committee

I’ve been busy again in relation to this important committee  – that does seem to miss the point quite a lot. My most recent submission related to the ‘costs of pension transfer advice’ and the issues surrounding that – again we’ve seen a good deal of miss-advising going on with Defined Benefit Pension Transfers – notably with British Steel Members. My comments are here Pension Select Committee (link is not secure – can you believe)

Given that advice in mandatory for most of these transfers you’d think the regulator would be overly cautious  – reality is it’s not and a tiny number of really bad apples create chaos.  If you are lucky enough to have a final salary type scheme  – then it is unlikely it will be in your best interests to move it away – really.

Importantly if you are cold called or approached about moving it is more than likely a scam.

The really sad news is that last year 245 victims lost an average of £91,000 each – with few prosecutions so far. Sadly, the regulators, scheme trustees and our police service seem unable to stop it.  Spread the word, pension transfers are often a problem.  As a rule of thumb – never accept the advice of one adviser always get it reviewed independently, preferably by an independent Actuary.

House In Spain

I have finally purchased my holiday home in Spain. It’s taken a year. Some important lessons on that.

Use TransferWise for all overseas payments (even comes with a debit card if you choose) exchange rate and fees are far lower than the banks and for me better than the likes of Currency’s Direct. I’ll be honest, provided you are happy to deal online Transferwise seem hard to beat – all currency options and with the debit card and app means simplicity. If you are not tech savvy –  i don’t have any answers at the moment.  My purchase costs were about £1800 less than my bank (HSBC) quoted.

Second point – Spain seems to be pretty open to us British living and buying homes there, for me it was the weather and the beaches and the fact we seem to be wanted was a godsend.

Top Tip – I used a British Law firm to oversee the purchase, increased cost of about £900 but  I saved that on the currency switch. In Spain they only speak and write in Spanish  – the law does not accommodate any other language.

Financial Independence Retire Early (FIRE)

This movement has been getting quite a lot of flack recently – but I can assure you this.  In the past two years i’ve met over a dozen who have effectively retired – at 40 something.  The advisory industry seems to be disinterested in this kind of planning. What’s really interesting about what the movement is doing.

  • Not using pensions.
  • Investing their own money on a low charge basis.
  • Invest for income in the main – once it’s paid it’s yours.
  • Being mindful about what they purchase.
  • Having a side business if working full time.

Importantly, they are not spending hours of time managing or worrying about money – most of the time they are just making small tweaks to a handful of principles. I have some more to come on this, but here is a brief summary of what the #fire movement is doing.

Some of this is easy peasey, but when you dig deeper on these points the differences are profound, when compared with the usual advice.

  • Not using pensions.
  • Investing their own money on a low charge basis.
  • Being mindful about what they purchase.
  • Having a side business if working full time

That’s it for now.

Richard

Pension Scheme Trustees Obligations

In August of 2018 the Pensions Ombudsman upheld a complaint from a policeman after he had transferred his pension from the police scheme to scammer without the scheme carrying out adequate checks.
http://www.pensions-expert.com/Law-Regulation/Ombudsman-s-police-ruling-highlights-trustee-duty-of-care?ct=true

Now, on the face of it you could say that that was an acceptable approach from the scheme, in that a formal request submitted by the member in order to transfer benefits from one scheme to another should be processed,  and that they [the scheme] should accept that request and move the funds.

Considering it further, the trustees of the scheme do have an obligation to the member in order to ensure that the funds and benefits they hold on behalf of that member, are managed correctly. And in accordance with the normal rules and regulations that go with this type of scheme. Is it fair to expect the trustees to be ‘trusted’ to make sure that any transfer made fits with this obligation?  As the ombudsman ruled.

My view would be that, they do have some responsibility and a duty of care. The Pension Ombudsman agree.


https://www.gov.uk/government/consultations/ban-on-cold-calling-in-relation-to-pensions/ban-on-cold-calling-in-relation-to-pensions-consultation-on-regulations

There is also the issue of woefully adequate enforcement after the event of a transfer. When these dodgy transfer businesses are finally caught, it ends up with a major paperchase which it seems few police forces are able to cope with and the attitudes towards white collar crime mean that a lot of these people [bad guys]  get away with it. The National Crime Agency reports that it’s working with regulators – yet very little seems to be done – limited action.

http://www.nationalcrimeagency.gov.uk/crime-threats/fraud

Project Bloom also seems to be woefully inadequate in reporting on these matters and clearly not estimating the size of the problem correctly, based on it’s own assumptions.

https://www.parliament.uk/documents/commons-committees/work-and-pensions/Correspondence/Letter-from-Chief-Executive-The-Pensions-Regulator-to-the-Chair-relating-to-Project-Bloom-13-November-2017%20.pdf

In February 2017 the Pensions Regulator even called for a Safe Schemes list.

https://blog.thepensionsregulator.gov.uk/tag/project-bloom/

Fact is this important and no doubt expensive project has been around for a number of years and delivering very little.

I have been approached by several campaigners on this matter in recent months and the evidence is frightening, these firms are transferring pension business and committing crime on an industrial scale. This is not some backstreet firm, it’s organised and professional.

When I submitted my returns to the Pension Select committee a few months ago one of the things I suggested was that we should make the various regulators a bit more responsible for what is actually happening here.  Now I know that passing the buck to pension scheme trustees or to the pension regulator may not be the right answer. That said we have a particular problem, we have a problem where lots of individuals are losing big chunks of their hard-earned pension money.

My suggestion is we consider very carefully the obligations that trustees have in order to make sure pension money is protected and that it goes to the right place if moved.  We also make sure that any advice provided is, either second guessed by a third party advisor or actuary. Or indeed it is signed off or accepted by the trustee as being a legitimate transfer.

So far this year we’ve seen more pension mis-selling and poor advice in relation to pension transfers – despite pressure from the regulator –  nothing seems to change.

So, here goes.

The Implementation a very straightforward traffic light system –  red yellow green. Would help consumers, this would follow an assessment by a third party adviser/actuary/pension transfer specialist – and would consider the receiving provider along with (potentially) other issues.  The benefit of this would be to put in place a further checks on the quality of advice that is being provided but also to make the bad guys consider very carefully and understand that there is a checking process in place and they will have to deal with.

There is not an advisor in the country that should be concerned about having a third party check on their advice and to be under external scrutiny. Importantly, by transparently providing an additional check on their advice to a member of the public should make everyone feel a lot more comfortable.  

The truth is, on this matter Government and law enforcement seems powerless to be able to protect individual pension scheme members from the scammers. I would suggest therefore that the industry picks up the baton and puts in place its own systems of checks and balances to ensure the individual members are protected. It has everything to gain and little to lose.

I doubt the industry will because it feels that it has enough to do – but if the pension transfer side of  personal finance wants to be credible in the eyes of the public and doesn’t want to face future regulation it should act now.

Ban Commissions

A end on commissions based on fund value (yeah I know the industry calls them fees – however fees are traditionally paid direct, by  the customer, not from the value of the investment), the simple allowance for advice direct from the scheme. Puts advisers on a par with other professionals and means some of the bad guys won’t be able to function.

Also means that members can get access to high quality advice without having to find the costs of advice upfront.

There are many ways to deal with these issues and we know that under the current system, for some reason change will not be coming soon enough – which means there needs to be an alternative. At the moment, the industry ain’t looking that good and the bad guys are still getting away with it – so something needs to change.