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British Steel adviser explains ongoing charges calculation to MPs

Work and pensions select committee chair Frank Field

Active Wealth director Darren Reynolds has emphasised that ongoing adviser charges for British Steel clients have not been calculated as a percentage of their funds.

In a letter addressed to work and pensions select committee chairman and MP Frank Field, Reynolds reveals more details about the way approximately 300 British Steel clients were advised by his firm.

The letter published today complements a longer one Reynolds wrote in January and provides additional details about fees and pension transfers.

For instance, Reynolds explains Active Wealth’s ongoing adviser charges are calculated on an hourly basis agreed with the client.

He says: “In most cases ongoing advisory service would amount to five to six hours of work, based on hourly rate of £100. This would result in annual charge of £500 to £600 per annum.

“While the fees would not have been calculated as a percentage of the pension fund, if we assume an average pension pot of £300,000, then a £600 ongoing adviser charge would equate to 0.2 per cent of the initial pension pot, prior to the addition of any investment growth.”

Reynolds also says of the roughly 300 British Steel Pension Scheme clients Active Wealth advised, 64 transferred out to an alternative pension arrangement.

Reynolds explains that in all cases, clients were advised that if their primary aim was to maximise a guaranteed income in retirement, then their interests would be best served by remaining in a final salary pension scheme, such as the BSPS.

However, if the client considered other factors to be a priority, then they should consider transferring out into an alternative pension scheme.

Reynolds also repeated the point made in his January letter that none of the BSPS clients have signed up to receive an ongoing advisory service and they have not therefore committed to paying any ongoing adviser charges.

He adds: “As I explained in my previous letter, Active Wealth’s practice has been to get in touch with its clients two years after they initially became a client of the company and, at that stage, to determine whether they wished to engage Active to provide an ongoing advisory service.

“They would, of course, be provided with details of the cost of the service at that stage as part of the facts they needed in order to make a properly informed decision.”

So far nine firms have voluntarily agreed to stop doing transfer work related to BSPS according to the FCA.

These are Vintage Investment Services, Retirement & Pension Planning Services, West Wales Financial Services, Active Wealth, Pembrokeshire Mortgage Centre, Mansion Park, Bartholomew Hawkins, Inspirational Financial Management and County Capital Wealth Management.

Today the Pensions Ombudsman started investigating more than 150 complaints about transfer values related to BSPS.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Interesting reading especially the first letter.

    Maybe we should be asking the FCA why they didnt do anything when files were sent to them in June 2016 ..yes 2016 .

    Our “not fit for purpose’ regulator

  2. Why on earth should a firm justify its fees to people like Frank Field. As the regulator will tell you, it does not involve itself in the commerciality of regulated firms, so why should MPs involve themselves in this. If the fees have been fully disclosed to the client before any work commences and the client has agreed to proceed on that basis, then what is the issue. What MPs should be scrutinising is the woefully undervalued transferred values offered by the scheme, not trying to blame the advisory community for all of the BS pension scheme failings.

  3. From reading Reynold’s first letter, I can’t help but get an impression that he’s simply been made a scapegoat and hung out to dry. The FCA made no comments to his advice process in Aug 2016. Can the FCA, or anyone in the know, shed any light into what was actually “wrong” with Active Wealth’s advice process (and other firms with suspended permissions)? Surely it would be beneficial to publicly disclose both good and poor practices. Thanks.

    • Totally agree, the FCA want a scapegoat and will get one.

    • The fact most of the clients money has ended up in the same unregulated fund, with dodgy history, massive commissions, exit penalties and tie ins looks a bit fishy, no?

      Im sure Darren would have been happy to charge fund based fees, however, he knew that getting valuations in the future would probably be tricky and even if he could the funds are likely to plummet so figured he’d just speculate on how many hours it would take to ‘review’ them and bill accordingly.

  4. What MP’s should focus on, is why, when all commercial firms agree that they cannot afford DB Scheme pensions, Government thinks that it can afford them for Civil Servants and MP’s?

  5. What MP’s should focus on, is why, when all commercial firms agree that they cannot afford DB Scheme pensions, Government thinks that it can afford them for Civil Servants and MP’s?
    Including Police, Fire Service and NHS Managers who at the end of the day are bleeding the system put them all in to auto enrollment and give then a decent pay rise not have the tax payer continue to pay these stupid pensions that we cannot afford and continue paying to spouces

  6. My concern with this is where there is a lack of ongoing advice.A DB transfer in most cases is difficult to justify without ongoing advice. Therein lies the problem. Once the tax free cash has been accessed is it fair to expect ‘clients’ to know what to do on a continuing basis? Surely only those who are financially savvy with a proven investment capability should be allowed to transfer without ongoing advice? It is as much about what happens afterwards as the transfer itself. So compliance could prove to be as much about an ongoing advice obligation as the initial transaction. The two are inextricably linked.Viewed through that prism would significantly reduce eligible transfers in my mind.

  7. I personally think that we have got this all wrong. I believe that there needs to be more questions asked as to how this came about it the first place.

    How can Tata Steel UK convince the government that they are insolvent, therefore the scheme can enter the PPF? Furthermore, how, after this can they set up another DB pension scheme with Tata Steel UK as the sponsoring employer?

    So, on one hand Tata Steel UK are insolvent, however, its OK to set up a new DB scheme with you as the sponsoring employer???

    Surely someone between the PPF, TPR and FCA can see what has happened?

  8. British Steel IFA Active Wealth goes into liquidation oh dear

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