One rule for you... 

There are, I have discovered, a few benefits to getting older.  One is that I can still remember the SIB Pension Review, a phenomenon that rattled on for years and years, and which preceded the PIA and the FSA by some margin.  Remembering the SIB Pension Review is a bit like remembering that family holiday in a brown-painted flat in Cromer, which smelled strongly of gas, when it rained the entire week - it casts a pall over almost every subsequent holiday.  One never quite views holidays in the same kind of way, ever again.

Thankfully, the firm I worked for at the time (late 1990s) was relatively unaffected by the whole thing, but there were principles here, the kinds of principle which provoked considerable exercise of the brain, and in the end provoked me enough to write to the SIB and complain.  That is, that the standard letters that intermediaries were required (by the SIB) to send to their clients contained sufficient manipulative, leading language for anyone with semi-functional critical faculties to realise that this was one of those "just take my chequebook" exercises.  The letter that we were required to use was an invitation for any opportunist to just step right in and help themselves to whatever took their fancy.  Some folks like to argue that charity starts at home.  This kind of charity simply gave it away.

The SIB, predictably, took a different kind of view - one of my earliest experiences of the kind of disconnect between the regulatory mindset and the real world, and one of the first examples of woefully-conceived redress, rolled out on an industrial scale.  Somehow, I had managed to file that one away in the deeper archives of my professional experience, but this week, the FCA's letter to clients who received advice in relation to the British Steel Pension Scheme (BSPS) has brought it all back, in a kind of garish 1990s technicolour.

There is a difference this time - the FCA is sending the letter, instead of requiring intermediaries to do the work.  But inside, where it counts, in the configuration of black dots on the white space, absolutely nothing has changed.  It helps to put yourself in the place of the intended recipient - someone who received advice so that he or she did transfer out of the BSPS into some kind of DC arrangement.  Let us imagine that this particular recipient received perfect advice.  The PTS did a top-notch job in every way, and the client got exactly what they needed out of the exercise.  They were 'treated fairly' too, listened to, catered for, and have nothing but good things to say about their adviser.  I am describing this scenario because I know advisers like that, and clients like that.

But now this letter plops onto the doormat.  They open it and read it over their morning coffee.  Here are some of the telling phrases:

  • "ACTION NEEDED: for former members of the British Steel pension Scheme" (so you need to do something about this)
  • "We encourage you to act, if you do nothing, you may end up with less money during your retirement than you should have done" (so there's a real downside to doing nothing)
  • "Many people that have transferred out of the BSPS since 2017 received unsuitable advice and could therefore be entitled to compensation" (so you ask yourself, 'how likely is it that I might have received unsuitable advice?' - and scan down the letter for the answer, which is...)
  • " only 21% of cases we reviewed, the advice given appeared to be suitable.  The remaining 79% was either unsuitable or unclear." (so, you are three times more likely to have been misadvised than advised correctly - well, that's going to influence your perspective a bit)
  • "If you are unsure or have any questions you should contact The Pensions Advisory Service (TPAS), a free, independent, and impartial pensions guidance service." (because, after all, your own adviser is not free, and, for all you know may not be impartial, either).

There's more in a similar vein.  Most people don't know how to read statistics, and most won't be aware of the peculiar nuances of the regulatory mindset to realise that they are being manipulated towards one particular course of action.  And here's the curious thing.  For quite some time now, the FCA's strongest focus, in developing their guidance regarding pension transfer advice, has been on the absolute avoidance of any kind of coaching.  Advisers must be careful not to put words into their clients' mouths.  We must take every necessary step to allow the client to articulate their own priorities and goals, and avoid shoe-horning them into our own process.  We must present the benefits, drawbacks, costs and risks in as even-handed a manner as possible.  We must even take steps to triage our clients before we get to the meaty business of advising on the merits of a possible transfer.

None of those necessary checks and balances are evident here, in a letter which is designed to lead the client towards one course of action only.  Further evidence that the rules and values which we take seriously, which have become fundamental to the very way in which we work, are simply not shared by those who are responsible for drafting those rules.

Now, here's the thing.  This latest expression of the regulatory DNA is in relation to one particular context, that of the BSPS pension transfer debacle.  Many advisers in the UK therefore may be tempted to heave a sigh of relief, as they are not PTSs, didn't get involved in this area, and consider themselves to be in the clear.  But take a look at that FCA letter.  Why would such an exercise only apply to this single category of DBTV advice?  How difficult could it be for the FCA to apply exactly the same approach to, say, ISA transfers, or pension switching, or protection rebroking?

Tread carefully folks.  ValidPath are continually hard at work refining our Members systems to provide you with the best protections available currently in the UK - please ensure you use them fully, and follow our guidance.


Kevin Moss, 25/06/2020