Update – Pensions – Deposit Accounts – Pensions Select Commitee

Christmas is close – however, there is an interesting shift in spending patterns with a lot of retailers seeing sales down and discounts starting early – I don’t think anyone should be surprised by that given the political situation – that just seems to be getting messier and messier.  Keep your eyes open for a bargain.

Meanwhile  I am speaking to clients that are giving…
Homemade gifts – pickles/oils and sauces.
Waiting for the sales to start
Gifting second hand/recycled items

All of these make sense for the environment and of course, save money. As we all know, once a pound is spent, that’s it gone, it never comes back and is not able to be used again by us.  If you get in the game of preserving pounds, one at a time your financial life will soon change.

Pension select committee links
Earlier in the year, I submitted my response to a Pension Select Committee. For some reason it rattled big chunks of the advice industry, mainly because I asked for clarity over pension charges. Especially over the disclosure of the true costs.

Remember this – if you have smaller than average pension fund (£30k) and charges of just 2% – lucky you – many pension contracts are far higher, the amount deducted from your pension fund will be £600 per year or £50 per month. Double that to £60k and the costs become close to that of the average UK council tax, treble that to £120k and your charges will be £1800 every year – roughly the lease cost of a new Suzuki Swift .

Go do the maths on your own fund, you’ll be surprised I’m sure.

The link to my response on the subject of pension charges – on the  Government portal is here.
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/work-and-pensions-committee/pension-costs-and-transparency/written/88360.html – the link is not https – I have no idea why.

Pension review offer
If you’d like a review of your existing pension(s) I have a done for you service.https://www.thefinancezone.co.uk/product/pension-finder-and-review-service/ you can order online, it normally takes around four weeks to complete – most pension providers take three weeks to produce the information  – this review could be worth thousands of pounds and is currently discounted – until the end of December.

If you would like to do the whole thing yourself I have a template letter, usually £5.99 but at no charge to you. If you want it, drop me an email to richard@thefinancezone.co.uk  and I’ll send it back.

Link to previous newsletter covering interest rates 

Interest rates continue to be low, for those that missed my comments in the last email it’s linked below.


Rule of Seventy Two
I’m sure some of you will have heard of this before, once you start to get your head around how this works for you, you can immediately look at a potential investment and work out how good or how bad it is likely to be – roughly.

All you need do is take the number 72 and divide it by the potential return of any investment and you will end up with a rough number of years it will take for your investment to double.

Compounding interest is a wonderful thing and it is for that reason that I only ever recommend that any investment you make provides an income. Capital growth is never guaranteed and once income is paid it’s yours forever and can never be taken away. Unlike capital growth which will be removed as soon as the market falls.

This just leaves me to wish you a wonderful Christmas break, watch your money – no one else will.


PS there are a number of industry professionals on this list – I’ll be honest, no problems at all with that – but if you use any content without permission I will come knocking  – my bots are watching.


Pension Transfers | Pension Scams | Pension Advice – New Way

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.


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.


But we have a problem, we have a problem with bad guys and bad firms attempting to transfer money away from all kinds of pension schemes in order to defraud the members of their pensions. Despite 30 years of regulation we have seen that the bad guys continue to get away with their bad actions. Indeed Government has recently announced bans on cold calling in order to prevent some of these bad transfers, the reality is we still don’t have a proper ban in force and many more individual members of pension schemes will end up losing money.


There is also the issue of woefully inadequate enforcement in 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.


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.


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

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

The legislation is already in place, just needs extending and promoting.

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.

Money and 1998 – Advice Has Changed A Lot

When I first came into the financial industry, in 1988.

I started working for the Prudential assurance company at the Holloway Road office, I thought that we were indeed living in very modern times. We didn’t quite have the level of technology you see nowadays, for example the office only had one computer. And that was kept covered most of the time.

There were no self invested personal pensions nor were there any form of peer to peer lending or borrowing – and we certainly didn’t have any of the more creative mortgages that are around today. Sure things were far simpler then, that said the overall thinking was exactly the same. Save some of your hard earned cash in an investment area that made sense and hopefully at some stage in the future you would be substantially better off.

There was no buy-to-let market, personal pensions had only just been introduced and we were right in the middle of a property market crash. Margaret Thatcher was the leader of the Conservative Party and therefore our Prime Minister we also had the satirical TV show Spitting Images every Sunday.

The Prudential was one of a number home service companies that had survived ever since the beginning of the century. Nearly every working class person had access to a trusted advisor that collected 4 weekly cash premiums on the doorstep. These were not loan collections – these were savings.

All of those that wanted it had access to someone that could provide them with financial advice and guidance. Sure the industry will hate me for saying that, however the system worked perfectly. The man from the PRU, or the Liverpool Vic or the Pearl were trusted and respected individuals the wereall known locally.

So what happened? The marketplace moved on and most of these insurance companies were replaced by electronic and automated systems. Which meant the man from the PRU was no longer needed.

Ok, the products that was sold where never particularly competitive and certainly wouldn’t be considered in today’s world as being an ideal plan. But for many millions of people these savings meant that they had some cash available at some point in their lives which paid for children’s driving lessons and important birthdays, along with making sure that money was available for funerals and at various intervals holidays and high days. Unlike today’s enforced savings, money was made available at important intervals instead of a of at retirement.

The enforced savings we have available now – auto enrolment pensions, mean that payments are tied up until retirement date and can’t be accessed before age 55. And – certainly not the kind of investment you would make if you was looking to achieve financial independence before then, and certainly not making any sense when you consider it in light of the FIRE movement we have today.

The FIRE movement is a movement whose goal is financial independence and retiring early. The model is particularly popular among among millennial’s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums. From Wikepedia https://en.wikipedia.org/wiki/FIRE_movement

My working area for the PRU was concentrated in a tiny part of North London, the bulk of which was a handful of large council estates. I would guess that at least half of the residents had some form of arrangement with an industrial branch company. Which meant that at least half of the people living there had some form of long-term savings. Importantly at least half of the residents had access to a trusted advisor somebody that had financial experience and was able to assist with financial and technical expertise. Sure, there was always an element of sales. There always is.

Home Service
The home service model served the British Public for many years. I guess it just became too expensive to maintain and the contracts that were available started to look a little out of place in the modern world. And things move on, insurance companies needed to evolve just because it had worked for the previous 70 or 80 years didn’t mean it was going to work looking forward.

Advice on the doorstep.
I get the fact that times have changed however making sure that individuals could get access to financial advice in their own homes on a weekly or monthly basis just makes perfect sense.

Even if they had a particularly simple enquiry it could be answered, I had many clients that made notes and stuck them on the mantelpiece or inside the payment books. To make sure by asked the question when I arrived. If you compare that with what’s available now, you can pop over to Money Advice or even the main regulator site and if you are lucky they will be able to answer the question, the reality is any of the government sponsored sites are limited in terms of the explanation and of course are not interactive. Advice, on the doorstep may seem quaint now but for many it was extremely valuable.

Everybody who wanted it had access and in their homes.

Industrial Branch
The policies and plans that were arranged under industrial branch regulations were very simple, simple savings and investment products and simple life assurance products which paid sufficient for working class customers and their circumstances. Many of these products had been available for decades and met the needs of most. There was never any need for complexity nor is there now. In fact the industry overcomplicates what are very simple matters.

What happens when you die? What happens if you live too long? All of these questions were answered by simple industrial branch policies and the man from the PRU.

When regulation first arrived in 1988 and the industry was forced to separate into tied and independent advisors, there was a flurry of activity. And the likes of Abbey life and Allied Dunbar continued to promote their high priced and expensive products to support a BMW/Mercedes driving sales force. both of these companies should have been regulated out of existence – that said they still exist but under a more modern look. Consumer choice is one thing…

Cost of regulation
Despite years and years of regulation we have seen mass mis-selling still continue in fact the level of Consumer Protection now seems to be not much more than it was in 1988. the costs of regulation are met by the product providers, these are funded by the profit from the sale of products, therefore it is the consumer that ultimately pays for its own regulation.

There is a perception that the financial regulators are good at what they do – the reality is much of the work from the various regulators that has overseen more and more bad stuff going on.

For some reason they seem powerless to stop it. even advisors that were fully regulated and authorised by modern regulators have mis-sold on a massive scale. Along with fraudulent activity.

That’s more than a bit mad it is not acceptable and should never happen in a modern regulated financial services industry.

Old School Stuff
There are any number of aged principles when it comes to managing money. None of this is taught in schools, none of it forms part of a curriculum in any educational establishment. There is no GCSE in Money Management. It seems that a financial education can only be learnt once you are outside of the mainstream schools – sure I get that fact that money items are on on some curriculum’s.

There are a number of principles in relation to money and money management and these will probably be reduced down to 8 or 9 separate points in a Moneytrainers seminar or workshops.

I work with these financial principles which crossover, or as I prefer – dovetail. By making sure you work with and adhere to these principles you will be able to leverage your money so that it works for you rather than it working for everyone else. Simple things like comparing Building Society accounts on a regular basis make so much sense yet so few actually do the work.

It’s for these reasons that I work with people to make sure they understand what it is that makes the difference and how to ensure that your money works for you.

What’s Changed
In this modern life, this modern world we live in, access to information is everywhere. What used to be made privy to just a few is now available to everyone. The changes we have seen in the last 5 years have been dramatic with information and high quality guidance along with low-cost products on widely available — being your own financial advisor is now so easy and so straightforward.

And in support of the DIY approach we have information coming out of the financial independence movement (see FIRE above) which is starting to transform the lives of those working with it. Being financially independent at age 35 or 40 he is now possible for everyone, sure you might need to do a little bit of work in order to get there. But it’s certainly achievable.

This financial Independence was not really achievable as a DIY option 20 or 30 years ago but it’s certainly available now and using money as a leverage tool to improve your personal financial situation is a must-do. Even if you don’t attain independence in your 20s and 30s being financially independent in your 40s or early 50s is something to aspire to.

Can you imagine not having to go to work from age 40 to 43, can you imagine having sufficient income from your investments in order to be able to live the life of your dreams and only work 1 or 2 days per week? Hold on to that thought for a moment.

It really is achievable and many hundreds of thousands of people are already doing it.

If you are ready get to moving on this, get in touch and I’ll explain how you can do it and how easy it is.

You can get on my email list below, it’s full of interesting and cutting edge financial stuff you can use – not your normal bollocks.

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Pension Select Committee Response


They asked about pension charges and I responded.

The full response is here.





Pensions Select Committee


You can get full access to all the MoneyTrainers reports and the education resources, along with the tools you need to transform your personal finances from here.  Financial Ninja Training – three months of the very best.  It comes with a complete ‘lifetime guarantee’- no quibble, no questions asked – just fire off an email if you are not happy and your purchase price will be returned with 24 hours.

If you would like my  Pension Review Document – template letter and notes you’ll need this code Moneyt-Pension and this link  Pension Review

Response to the
Pension Costs And Transparency Inquiry.


About me.

Richard Smith is the explainer in chief over at www.MoneyTrainers.co.uk and the resident specialist over at www.thefinancezone.co.uk  you can contact him directly on 0774 007 6226 or via the website(s). Qualifications from the Chartered Insurance Institute and the Institute of Financial Services.



Pension providers are in a unique position in the UK.
The public perception is that Pension contracts are complicated with a number of moving parts, reality is, defined contribution pensions – personal pensions and the income options at  retirement are expensive and complicated. Many consumers are forced to pay for advice that is often not up to standard.
Despite years of regulation, since 1988. The same topics keep arising, mis-selling is still going on, poor investment returns are a constant topic and product charges are a real problem.
If you are in your forties now, you can expect today’s millennials to be at the peak of their careers when you draw your pension. Many of these will not want to be making contributions to a scheme that they are unlikely to benefit from.

There is little evidence to show that higher charging pension providers deliver higher performance. Many providers still don’t produce adequate levels of administration and nor are the comparison tools available.

Every change in Government involves a tweak to to pension policy or arrangements, with the main focus on ‘kicking the can down the road’ – there are serious problems with pension provision in the UK and no Government in the last thirty years has wanted to deal with the problems.

As an introduction I have included for you some of my comments from the Great British Pension Swindle along with placing a link to the full version in the appendix. A copy of this which has been sent to Messrs Hammond, Opperman and Corbyn and I have included the responses from their respective offices.

Do higher-cost providers deliver higher performance, or simply eat into clients’ savings?
There is no evidence to support that higher charging providers deliver more in the way of better performance or investment returns.  Before considering this furter I feel an explanation of charges is required.

An Explanation Of Charges

A 1% charge equals ten percent of a pension fund every ten years. 2% charge equals twenty percent every ten years.

Pension contract terms run from 18 ‘til death, dependent on the options selected. This means the provider has access to the income via charges for 61 years based on present average (male) life expectancy and assuming some kind of pension freedom contract is considered into retirement.

Charges are never expressed honestly, like they could be below.

“Dear Bob, good news about your pension. So far you’ve paid in x, we’ve charged you y, and because we are so great at managing your money your pension fund is worth £zz.zzp”

There are also further questions that arise.

Why there is little comparison information available.
Why can’t I find out who has the lowest charges?
Who has the best overall returns?
Who answers the phone fastest?
Who charges a penalty for early retirement?
The reason the industry doesn’t want to publish the information – it thinks consumers are too stupid to understand and will end up buying on price – not so.

Having access to information is not advice, advice is going to your GP and after an initial consultation you are are advised you are dying and need urgent medical help. You can’t find that out by looking it up on NHS.net, but you could get access to a review about your GP, or information on the prescribed drug. Just not a pension

A business that sells pensions is in a unique position. They have access to OPM – other people’s money and levy a series of charges over a long period of time.

It’s for that reason pensions are attractive products for businesses to sell.

Remember in addition to the fund fee there is a provider fee and adviser fee (both for normal pension and income drawdown products) these fees could be

Adviser fee  .50% per annum

Fund fee 1.60%

Provider Fee .50%

Total charge of 2.60% per annum or 26% of the fund  every ten years effectively wiping out any effect of tax relief.

Charges are not clearly shown within pension statements. It should be possible to to explain to a consumer… that under this contract your charges will be 1% fund charge, .50% pension manager charge and .5% adviser charge.

This totals an annual charge of 2%. If you have £72.000 invested, which is the average UK pension fund then the total costs of running your pension will be £1440 every year or £120 per month.

You can get full access to all the MoneyTrainers reports and the education resources, along with the tools you need to transform your personal finances from here.  Financial Ninja Training – three months of the very best.  It comes with a complete ‘lifetime guarantee’- no quibble, no questions asked – just fire off an email if you are not happy and your purchase price will be returned with 24 hours.

The concern is, that many people wouldn’t invest in pensions if they understood the true cost of them – and that’s a massive problem, it’s also one reason they are not considered as a primary investment for the working classes, but are of course used by the wealthy as a tax planning tool.

Pop over to any of them and search for ‘charges’ or ‘pension charges’, there are few results and most certainly nothing there for you to use.

Providers tend to obfuscate costs and charges.

Since financial regulation in 1988 there have been various attempts at disclosure of charges and these have always been decided by the product providers. Financial regulators give guidelines and these are then interpreted by the advisers/provider.

This has not benefited the consumer. Yet with loan and mortgage contracts the regulations have been prescriptive and advised consumers exactly what these charges are.

So instead of using terms like RIY – reduction in yield or by ‘cost comparisons based on projected returns’ why not state the true cost in pound terms. This would then enable consumers to compare on a like for like basis.

Examples of pension charges if you pension fund is worth £500,000



Average UK Pension fund (source PensionBee) is £71342

Advisers are not clear about their initial charges or ongoing costs, sure there are some initial disclosure documents but the information tends to be buried in multi page documents, and normally within not on the front page or rear page.


Let’s look at how one provider does it.   A simple search on Aviva – UK for ‘pension charges’ shows

The answers to the question are on one page. https://www.aviva.co.uk/retirement/pensions/aviva-pension/

However that is not the full story. In order to work out what the charges are on your pension you’ll need to do some digging.

What fund are you invested in? Each fund has a different level of charges.

What pension contract do you have? Aviva will have hundreds of different contracts each one with a different charging structure.

Obfuscation is everywhere.

Pension Providers Are A Business

Providers are businesses and are run with the sole objective of making a profit and will therefore charge the maximum they possibly can and despite the massive increase in the number of providers there is no evidence of true competition in the sector in that the costs of pension products have remained very consistent over the years, and there are no new firms coming into the market with different offers, just more of the same.

The cost of providing the pension wrapper should be very little, there is virtually no reporting (annual statements) and limited administration.

The levels of service from many providers has been slipping in recent years. – not helped by consolidation, businesses like Phoenix Life have taken over more than one hundred and forty seperate life assurance and pension providers in recent years.

Despite reviews and enquiries about pension charges various regulators, including the Financial Conduct Authority and the Association of British Insurers little has happened.

Five years after the OFT review, four years after the ABI review the FCA has decided to review pension charges and outcomes.

Non performance, high charges (that have contractual obligations that apply) and a difficulty in getting pension funds moved from one provider to another make them lucrative products for providers and awkward investments for consumers.

Investment Funds – important because this allows providers to further complicate the matter of pensions

Many pension funds have investment returns that can only be described as lacklustre, the underlying investments allow providers to further complicate matters and increase the overall level of charges.

With no downsides for non performance in relation to investments  – there is little chance a complaint will be upheld over poor investment returns, and many pension funds don’t outperform the market over the long term.

Let’s Consider Pension Fund Performance Generally.

Morningstar.co.uk – a leading fund information provider show that there  are a large number of pensions funds available.

Of these funds there are 680 that get a five star rating, just four and a half percent (4.51%) of all UK pension funds are rated as the very best.

Excellent fund performance tends to come from specialist areas, most consumers will only have a small part of their overall funds invested in these specialist funds.

The key to all of this as a consumer, how do you work out what to invest in when you have a range of different investment returns and 15000 odd choices. Advisers are only guessing and consumers are doing even worse than that.

Thousand of pension funds underperform, for which there is no basis for complaint or any protection against non performance. Perhaps the only consumer product where there is no comeback for being useless, moreover chances are you won’t find out how crap the investment is until a lot closer to death.

Another reason why pension statements should show. “Dear Bob, good news about your pension. So far you’ve paid in x, we’ve charged you y, and because we are so great at managing your money your pension fund is worth £zz.zzp” perhaps this could add in ‘which is an increase of £xx in the last twelve months’.

At the date this feedback was compiled there are 2176 shares listed on the UK (LSE) stock exchanges.  Worldwide there are more opinions (fund managers) than shares to invest

Organisations like Money Advice Service and Pensions Advisory Service do not provide sufficient information in order for consumers to be able to make an information decision on charges.

Pension providers do not seem to behave like they are in a competitive market, no matter how many providers enter a market there is little different on offer.

Is the Government doing enough to ensure that workplace pension savers get value for money?

It would be easy to respond to this and say no, however the bigger problems seems to be in working out what is value for money.

Auto – Enrolment (AE) –  no more than a gift to the industry. These newer style plans have started to replace personal style pensions and are the new standard for company pension plans.  They are also mandatory for those earning over a certain amount, your employer is also forced to make contributions to the scheme on your behalf.

For many lower paid, multiple job workers they miss out on employer contributions and also tax relief which makes a completely mockery of the legislation – enforced savings.

Government is really saying, sure we want everybody to have a pension but not those working on a limited number of hours.

NEST  is the Government’s flagship AE scheme that was set up via a loan from Taxpayers and in conjunction with TATA Many employers use this scheme as a default option. At the moment is is some £400m in the red (latest accounts) and it’s only source of income is charges deducted from members funds.

Again it seems that a Government created provider is no better than a private company at this whole pension thing – problem is, as a taxpayer investing in a NEST pension you pay twice, once in charges for your own fund and secondly for the taxpayer subsidy it’s getting.

Further, TATA  the specialised consultancy had agreed a £600m fee over the first ten years to cover the I.T within NEST (£60m per year buys a lot of I.T)  given that TATA have been a supplier of I.T to the pensions industry for many years it would appear to be ‘money for old rope’ as they say outside of Government circles. As they had already developed the software required.

If you consider the situation with NEST, the organisation set up with taxpayer funding has continually failed to deliver, it has recently borrowed more money in order to cover its costs. These costs are borne by the policyholders, many of which have no individual choice under Auto Enrolment rules – mandatory pension contributions, deducted from gross pay.

Once a member works out that a) fund performance is poor or b) charges could have been lower with a different provider or c) NEST decides that it needs longer to set up and borrows yet more money and the members need to pay higher charges for a longer period – there is nothing the member can do. Save opt out and lose the employer contribution.

Forcing a consumer to pay for something and then not casting into statute a set of rules forcing the product to be better than best is not fair.

Someone making payments to a NEST AE scheme could also have credit card debt or personal loans in place. Credit card interest rates could be as high as 29% per annum and personal loans could be as high as 10% per annum in interest charges. Government should be doing it’s best to inform and educate these people that putting money into a pension, instead of reducing debt could be doing them great financial harm in the short term.

Interestingly enough, the fund manager for NEST – State Street was expecting the funds under management within NEST to be in the region of £100bn and £200bn in total

Based on these figures, and, the fact that average charges for NEST are .50% per annum, there will be at least £500m of gross profit available per year at some stage in the future. It’s good news for State Street, TATA and NEST – but as the figures are not published we can’t tell.

Let me ask you this question. How would you like a business that makes half a billion a year, with profits tied in for fifty or sixty years of more and fully supported by law?

Government is being naive over NEST and Auto Enrolment more generally.

What is the relative importance of empowering consumers or regulating providers?
Consumers need to be fully aware of their options. If we continue to use taxpayer funds to subside an industry via pension tax relief I think they should be made fully aware of their options and a full explanation of the pros and cons of pensions.

Importantly, risk warnings about the importance of reviews, charges and investment performance along with the implications of investing in pension versus repaying short term debt.

Empowering consumers is the most important issue here, no more regulation for providers but more information and workshops held.

Simple and timely information should be provided and impartial information given.

NEST is soon going to have profits of half a billion – it can afford to run these. If pension tax relief is ended there will be a further £50b (odd) available. If we make Google and Amazon et al pay their may be a bit more to go around – sorry off topic.

4. How can savers be encouraged to engage with their savings?

Not so long ago there was an army of people offering local advice in the home. The home service providers, The Pearl, Pru, Liverpool Victoria etc. Offered low cost guidance and a range of savings and investment products.

Sure, you could say that these products were expensive or that the distribution costs were prohibitive. Yet, there was a class of citizen that could access a trusted adviser – every month as they called at the house. Sure, it seems an outmoded form of advice, but plenty of people benefited from this kind of service.

We also had milk delivered in reusable containers, and meat wrapped in paper, took our own bags to the greengrocer – some things look dangerously outmoded, but actually were the right model. We didn’t need recycling then.

There is no reason why a number of online portals can’t be created with some simple ‘do this get this’ examples. But, with further input from specialists. Sure the advice industry is going to hate it, but they hate anything that may take bread of their table, to alter the status quo.

There is a distinct lack of information around. Money is perceived to be boring or difficult – it’s not properly taught in schools and there is limited information available from the Government/Industry supported portals – where it does exist, there are few positives.

You can get full access to all the MoneyTrainers reports and the education resources, along with the tools you need to transform your personal finances from here.  Financial Ninja Training – three months of the very best.  It comes with a complete ‘lifetime guarantee’- no quibble, no questions asked – just fire off an email if you are not happy and your purchase price will be returned with 24 hours.

There is not sufficient information showing/helping people become financially independent, just plenty of negative stories for when the proverbial is hitting the fan.

Organisations like MoneyAdvice are not proactive enough in their approach to make sure that everyone considers their personal financial situation.

There are no charge calculators or guide.
There are no risk profile/asset allocation tool.
The two things that decide how good or bad an investment is are, charges and asset allocation, little mention of this on Money Advice and certainly no practical help.

Advice on AE if you have debt’s needs to be better structured on Money Advice, but at least it’s mentioned.

How Can Poor People Save?

This conundrum has been considered carefully by Government after Government – and so far they have all missed the point.

Poor people can’t save because they are poor.

Those just over the breadline are struggling because of low paid work, zero hours contracts and a constantly changing benefits system, oh and then there is the housing issues.

If you have a have a healthy and wealthy working population with money spare at the end of the week or month – they’d save, no problems.

Enforced savings via Auto Enrolment should be replaced with an adequately funded state pension – see The Great British Pension Swindle in the appendix.

Money Education

All Government portals should be focused on a financial education.

5.How important is investment transparency to savers?

It is vitally important.

The industry, both provider and adviser do their utmost to make sure that specific charges are hard to work out, they complicate fund choice by using Mirror Funds with no meaningful explanation and don’t offer information in a straight forward enough way.

6. If customers are unhappy with their providers’ costs and investment performance/strategy, are there barriers to them going elsewhere?

Of course they are. The one thing that providers hide behind and are fully supported by the regulator is the issue of barriers.

Government even helps by making advice mandatory in some instances.

There are no


Understanding the terms

No comparison of charges available

Simple table of charges laid out in an identical way from each provider

7.Are Independent Governance Committees effective in driving value for money?

This is not a complicated thing to we have a number of financial regulators who should be working to make sure that the industry they regulate does the right thing for the customer.

If the advice industry and the providers adopted the stance of a fiduciary there would no need for regulation or independent committees.

From Wikipedia

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. — Lord Millett, Bristol and West Building Society v Mothew

8. Do pension customers get value for money from financial advisers?

Despite being heavily subsidised the advisory industry, along with the fund management and pension industry continues to charge considerably more than necessary.

Less than ninety four percent (94%) of UK consumers take advice.

Advisers are not interested in working with people that can’t service their businesses long term. The advice industry is like a ‘heroin addict’ desperate for it’s morning fix, but then makes sure that once it’s had it – the abusive relationship with it’s income source continues  – ongoing advice fees allows it’s desperate habit to continue.


There is no other professional service in the UK that would be allowed to operate like financial advice practices.

If adviser fees are deducted from the investment funds then no VAT is charged on this fee which does seem like a heavily tilted market for advice.

Based on some industry figures it seems that around six percent of the population use the services of a financial adviser, with ninety four percent not using them at all. It does seem a little unfair that there is a VAT charge on tampons, but not on financial advice, all because of an historic arrangement in relation to commissions.


This unequal treatment robs the taxpayer of the VAT.

Financial advice and product arrangement are clearly a service and should have VAT levied in the amount charged. Every other professional service provider works on this basis.

There would be questions asked if Accountants, Solicitors and Estate Agents could avoid VAT by the use of a different form of contract.

Contingent Charges

Since the commision ban came into force some years ago, advisers have been able to opt to have the fees charged for advice and product arrangement paid by the provider, taken from the amount of money invested or transferred.

This has made it very easy for advisers:

To get paid
To hide the true cost of advice
To benefit from no VAT on services (advice)
Commision has been replaced by a disclosed fee that is not paid paid by the client, but paid by the product provider – so much like a commission, but not.

Importantly, the level of fee charged is often disproportionate to the work done.

If we consider Final Salary Pension Transfers, where it is a legal requirement that members get advice if the transfer value is over £30,000.

Government decided that it should force consumers to take advice, which on the face of it seems fair. However it forgot to ensure that the costs of advice were also legislated for.

Now we see the costs of advice running from £2500 – £10,000 depending the size of the fund, advisers are leaning on the fact that ‘because members don’t have to write a cheque for the costs of advice’ – in that it’s taken from the final transfer figure – advisers can charge more.

At the same time we’ve seen the quality of that advice – which is mandatory called into question – I’ll be honest the results ain’t that great.

Given that the time taken to process and advise on a such a transfer is the same for a £30,000 pension pot and a £1,000,000 pot it doesn’t make sense to have charging schemes on a percentage of fund basis.

One option here would be make advisers charge a set number of hours – let’s say four hours and then prepare an actuarial assessment of the advice and the options for transfer. Cost of which could well be less than a thousand pounds, this will achieve several things.

Prevent the sale of a pension transfer
Ensure the advice has at least two heads looking at it
Prevent the ‘bad guys’  and ‘scammers’ from getting a look in
Funding could easily come from the scheme with an extension to the Pension Advice Allowance. Importantly it comes with a positive assurance that at least two suitably qualified people have considered the options and highlighted any potential problems.

Trustees can confirm the process has happened before releasing funds.

Pension mis-selling

Contingent charging – commission from a sale that is only paid if a client goes ahead with a  pension transfer encourages miss-selling and should be banned with immediate effect.

If advice has any value it should be paid for directly. It works very well with the legal profession and accountancy.

The failed sales where advice has been provided are subsidised by the others that do end up paying. Most advisers are playing a numbers game, hoping to make a couple of sales per week. Rather than being truly independent professionals.

Can you imaging going to see your Oncologist, only to be told you won’t need to write a cheque for your treatment, as they’ll be paid a fee for the advice, from sale of the recommended treatment to the NHS?

Ongoing fees

Many consumers do not under the fact that there will be an ongoing charge levied on the products arranged. For many financial advice practices this is ‘money for nothing’ as little review work is really undertaken.

Ongoing advice fee’s should be invoiced, have VAT charged on them and be used instead of ‘ongoing commission’.

It is not always made clear what these fees are for and the basis for charging them – nearly always are ongoing fees charged as a percentage of fund value – yet the same amount of work is required to manage a portfolio of £50,000 and £250,000 yet the fees charged could be massively different.

Final Thoughts

We’ve had financial regulation since 1988. Little has changed, there have been plenty of reviews and lot’s of talk – yet there is still mis-selling going on – e.g British Steel pensions – all created by regulated firms, still no ban on cold calling and still charges being levied on pension products that no one wants to address.

Why is that? Is it the same reason no one from RBS was sanctioned over it’s restructuring unit, is it the same reason that every decade has seen problems of pensions, PPI, fraud. The same people doing the same old things, still no effective competition, still no serious considerations of the options.

The state needs to either state simply – ‘buyer beware’ over the entire thing and put it’s resources into stopping the out and out fraud, or step up and start to use it’s strength and buying power to solve the problems we are facing. The half-way house, in place at the moment is serving very few.

2018 – Where Are We Now With Pensions? State pension provision is collapsing unnecessarily, there are some options (more to come on that later) and despite mandatory pension contributions in the form of Auto Enrolment plus the recently announced Pensions Freedoms many consumers have no idea what is really happening – nor how they are being milked  by providers and advisers to tune of billions of pounds per year, via pension charges. Along with being let down by Government policy.

Importantly these same consumers are accepting a promise of riches from their pension schemes when they retire.

These promises are unlikely to be realised and there is nothing the pension owner can do about it. Because of charges and dire investment returns these riches are unlikely to be realised.

For many, any penson reviews will be to late, and given that pensions don’t pay out until you three quarters of your life has already past – it’ll be far too late to do anything about it.

Worse still, many UK workers, peer through the window of local council offices and schools, to see those employees feasting at the table of a ‘gold plated final salary pension’ these Government staff,  will enjoy a guaranteed pension that has to be topped up by taxpayers, who will never see such a thing.

State Pension

Over the last twenty years state pensions have been altered and adjusted to the point where they are now no more than a giant Ponzi scheme. This weeks income to the system only covers this weeks cost with little or any left in reserve. Indeed any National Insurance fund the general public think there is, will be tiny if it exists.

Given that there are less people paying into the State Pension it is a reasonable expectation that any drawings from it are going to be under pressure.

It is the tax payers of today that are paying todays pension – there is no pot of money.

Future generations are being left with a liability – something they must pay for but are unlikely to receive any benefit from – mainly due to the overall reduction of the State Pension scheme but also because of the huge liabilities that are building up within public sector pensions.

No matter how this is fiddled with from a political standpoint    it is not sustainable. Government keeps tweaking the system in the hope that no one notices but not telling the truth or informing the people properly. It would be wrong of me to accuse ministers and members of parliament of lying – more just not dealing with the problems that are obvious.

The #waspi campaign highlighted the lack of information provided by Government in relation to pensions. Extension to retirement ages under the state scheme were not well publicised and lots of women who expected to draw on pensions found they had to wait a further few years before getting it. We can expect these changes to continue.

Indeed since the changes made in 1988/1995 the whole area of state pensions has been under pressure. It is partly due to population growth and partly because of people living longer in retirement. All of these things have been known about and well documented since the 1980’s.

Private (Personal) Pension Arrangements

All of us have been encouraged to make our own provision. Yet, after some thirty years of personal pensions most of these are not clearly understood nor effective. The pension providers and Government do as much as they can to complicate matters. With rules and regulations that change frequently.

The big problem with any conventional private arrangements is this – you’ll never know how much the likely pension will be until you are at least halfway to retirement (at least a third dead) or maybe even longer, and

Charges have a massive impact on your final pension under any personal arrangements.

Investment performance is questionable in the main with average investment returns being bad to dire, with a handful being good.
Government Subsidy for The Pension Industry
Pensions tax relief costs us the taxpayer some £41bn per year and based on the present population (May 2018) that’s £624 per person per year,  and has done little to improve the lot of the pensioner. Importantly, treasury forecasts seem to indicate that the cost of tax relief will be at £50bn very shortly (see appendix).

Based on the current set up of most defined contribution pensions all of this relief is lost in charges and therefore is more of an immediate benefit to the providers/pension managers as they levy their charges on the pension contribution/fund once the tax relief has been added, thus increasing their take.

Importantly for the individual,  pensions are broadly tax neutral over the long term. When you draw down on the benefits you can take some as a tax free cash amount and the balance is taxable, in fact dependent on the actual performance of the pension fund the Government may even make a small amount of money on it’s tax relief loan to you.

What tax relief does do, is mask the level of charges levied on pensions and is an immediate gift to the large insurance companies in the UK.


You can get full access to all the MoneyTrainers reports and the education resources, along with the tools you need to transform your personal finances from here.  Financial Ninja Training – three months of the very best.  It comes with a complete ‘lifetime guarantee’- no quibble, no questions asked – just fire off an email if you are not happy and your purchase price will be returned with 24 hours.














The Great British Pension Swindle


British pensions are in trouble. Despite thirty years of change and Government fiddling the poor consumer still has no idea.

The financial advice industry is not working like it should.

Pension providers continue to milk consumers  like they are some never ending Milk Lake.

Lifestyles are changing quickly and modern investment methods now make pension planning look  – so last century. It’s time to modernise, to end the rip off and take control of your money – you’ll thank me for it.

When you’re ready to get a grip on this. Get in touch www.moneytrainers.co.uk

The Great British Pension Rip Off