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Henry Tapper: ‘We’ve really made a mess of DB transfers’

Tapper-Henry-First Actuarial-2013
First Actuarial director Henry Tapper

First Actuarial director and British Steel campaigner Henry Tapper has criticised the role of unregulated introducers in encouraging unsuitable defined benefit transfers out of the scheme.

Tapper has been heavily involved with Operation Chive, the pro-bono adviser-led initiative to give help and guidance to steelworkers after the British Steel Pension Scheme’s collapse left them vulnerable to transferring against their best interests.

Speaking at Money Marketing‘s Retirement Summit last week, Tapper noted that while a number of regulated advisers had stopped trading due to unsuitable transfers, lead generators played a key role in funnelling clients to transfer specialists in exchange for a marketing fee.

Tapper said: “The lead generators got to work. They were brilliant. The first thing that they managed to do was get into the plant and start speaking to the foreman. They said to the foreman: ‘If you get us someone at our sausage and chip suppers we’ll pay you £80. If that person then becomes a client, we will pay you even more.'”

“We had process driven advice. We had people able to take 20 or 30 leads in a week and somehow or other make a recommendation that quickly. TVASs were being shipped off to specialists, quotes were being sent off by courier, [IFAs] had never, ever been looked after so well.”

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Though many cash transfers were valued only at 25 times the pot, lower than the 40 times or higher transfers that have been seen in the rest of the market, Tapper said the financial position and experience of the steelworkers meant that they were bound to have taken the cash value in most instances.

The average cash in hand offered to steelworkers was £400,000, after a change in the discount rate, when younger clients in particular saw transfer values double, breeding a “buy now while stocks last” mentality.

Tapper cited examples where he had met workers who could not understand the documentation provided because they are illiterate.

Tapper says: “We were dealing here with really, really, really vulnerable people. People who thought that a £30,000 pension was worth £30,000. When they found a £30,000 pension was worth £750,000, they thought bingo…All my Christmases have come at once.”

Trustees have admitted they underestimated the volume of transfer value requests they received, according to Tapper, but he also noted that there is significant difference in estimates of DB transfer volumes and where the investments end up between regulators, government agencies and private companies.

“We have really made a mess of this,” he said.



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There are 16 comments at the moment, we would love to hear your opinion too.

  1. Nor sure about the headline…..who are the “we” that Mr Tapper think’s he and the rest of the readers are part of??

    • I was there; Henry did not say “we”.

      • Sad isn’t it. Justin never let the facts get in the way of a good story!

        • Hi guys. I just listened back to the tape again. Henry did in fact say “we” – my transcription is accurate. I hope its clear that Henry was talking in general terms, i.e about all parts of the DB transfer chain. Thanks, Justin

          • Thanks for making that clear.

            “we” still doesn’t make sense though as Henry isn’t any part of the DB transfer chain is he?

          • Apologies, Justin – my hurried response did you a disservice – I should have said that Henry didn’t blame the whole IFA community for the the poor outcomes for some members of BSPS.

  2. The whole DB process is fraught with pitfalls – even for honest advisers. Trustees, by their own admission, can struggle to produce all the necessary information in a timely manner, actuaries can change assumptions which can have a significant effect on a scheme’s funding position and I am not entirely convinced that the T&C surrounding the PPF will remain the same with the imminent case of a Mr Hampshire, I believe, going before the ECJ.

    But there is perhaps one straightforward action that could be effected now, regardless of the above, and that would be to insist that any SIPP provider can only permit funds from DB transfers to be invested in regulated investments and that an audit trail needs to be kept that ensures that these funds do not subsequently end up under a car park in Dubai etc.! This would still allow clients/advisers the flexibility to look at unregulated investment opportunities but only with new money and DC transfers.

    I appreciate that this will not solve all the other issues, including that of the dishonest and incompetent advisers operating in this arena, but might it not be a start, is it practical to enforce?

    • “… only permit funds from DB transfers to be invested in regulated investments and that an audit trail needs to be kept that ensures that these funds do not subsequently end up under a car park in Dubai etc.!”

      Well, that’s the corporate bond market closed down then. Any more sensible ideas out there?

      • Adam, just looking to kick off a debate regarding how we can develop a market that can function for those clients with good reasons to move their benefits from their DB schemes while looking after the less experienced but totally trusting individuals. I was taught that, if you want to shoot something down in flames you should have a positive alternative to replace it – so, sensibly, what would you do?

        • I’d recognise that any policy response would soon be gamed, and a new ratty product that ticked all the regulatory boxes would appear.

          When the bad guys don’t play by the rules, new rules only mean that you load more cost onto the good guys. The market isn’t fundamentally broken; the solution to the problem is effective policing.

  3. The particular issue is not transfers from DB schemes per se, but the astonishingly cavalier approach taken to the downstream investment recommendations. An expensive SIPP, expensive, non Regulated, non diversified and high risk investments and a 10& exit charge? Disgraceful. I have suggested one way to avoid some of the wider angst over DB transfers is ti require Trustees to take CETVs back into the scheme, albeit with due account taken of values.

  4. Many advisers with the DB permissions have elected not to advise at this time, especially after the BSPS, until clearer outcomes are agreed by all parties. The liability to any business is to high and not worth the risk.

    The FOS and FCA have two different outcomes, the PI Insurance has gone through the roof if even available and the political will firmly on the side of the consumer, should they wish to complain.

    The system is broken, it needs totally renewing, with all parties, Regulators, Politicians, Insurers, Trustees and Advisers taking responsibility and not just trying to point all the blame at advisers.

    Where is the balance, the media is painting a picture that all advisers have advised incorrectly. The regulator has had three years to manage this and the FOS is looking to apply rulings using hindsight and assuming all consumers are Jelly Fish and have no brain. The “I did not understand”, defence in many cases being untrue. For those that truly did not understand, why did you do it.

    Many DB Transfers have been arranged for the right reasons, with the clients full understanding of all the risks, wanting the flexibility, wanting to retire early, yet these will by default be given a get out of jail card free, due to the actions of certain individuals and the inevitable ambulance chasers.

    A good starting point would be any complaint upheld can only be compensated via income, an annuity has to be purchased. You should not be able to have the penny and the bun. This makes so much sense, yet is not the case. We hear all parties talking about the £ signs when considering transferring having an influence, this clearly is the case when complaining. If the result is the flexibility they wanted when transferring is removed, a set monthly income restored and loss of the return of funds death benefits, I wonder how many would actually complain. They should not be given a lump sum of money, this is not returning them to what they had, which is what their complaint is.

    • Good point. I have a client where that is what we want to happen. She and her husband only have state pensions to meet their secure income needs now as instead of recomending her husband accessed his PPP via drawdown to realsie a small tax fere lump sum, here then “adviser”m when she said she wanetd to take some of her bank pensions PCLS 6 months before her NRA, transferred her DB pension, passed her £6k of PCLS and his fees for her new drawdon plan in the first year worked out at £4k….. and the advsier who didn’t have G60/AF3 havig done it in March 2015 can’t see the problem with “order taking” instead of advising.

  5. Thomas Frodsham 13th June 2018 at 9:15 pm

    Excellent point. Would have gone a long way to limiting damage

  6. Perhaps the starting point should be the environment in which DB transfers are taking place. The first step is politicians making decisions without thought to the consequences (for ‘pensions freedoms’ read ‘get money here’, wonder how that will end up?). Secondly, regulators recognising the risks but asleep to what’s happening and not brave enough to set much more rigorous rules and guidance about what’s acceptable and what’s not.

    What’s really sad is this is just repeating the past, at least for those of us old enough to remember.

    Henry refers to ‘we’ and I guess to the extent we’re in the in the same pot he’s correct. However, the people who turned up the heat and had the ability to regulate it are stood around wondering why it’s got hot.

    There have been adverts appearing recently on TV about pensions, noticeably just asking if you’ve been advised to take out a SIPP. Claims firms keeping it simple and just reversing PPIs, irony or conspiracy?

    And so it begins…

  7. Robert Milligan 15th June 2018 at 4:15 pm

    It is very simple, as with Superannuation DB benefits, Just Say No, it was never an Employers responsibility to allow the funds to be transferred out. So just stop it. It could be done. Of course then we will have the claims chaser after us for not having transferred them out prior to the Banning of DB out Transfers.

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