There has been plenty of press coverage recently on the Pension Protection Fund. Laudable though the scheme is, it seems to have been badly thought through and is failing to give the whole target audience the reassurance it was designed to bestow. We now have actuaries publicly declaring their doubts over the viability of this scheme.
As we have always cried, you cannot review business with the benefit of hindsight and this has now gone full circle, coming back to haunt the FSA. Commentators now point out that around 60,000 people have already lost their pensions because of employers going bust despite previously believing their retire-ment benefits to be safe.
Ironically, on the one hand, our industry has been houn-ded to within an inch of its life by the pension review and its tragic aftermath of lost confidence and on the other we have final-salary schemes refusing to pay transfer values “due to the continuing uncertainty regarding the scheme's future”, to quote a benefits consultant for a recent request to transfer. It truly seems the world has gone mad and we are damned if we do and damned if we don't.
It appears to me that the use of imprecise and inflammatory language is at the core of the problem. It may seem a small point but if you think back to the pension review, that all went awry when the PIA refused to accept there was a fundamental difference between transfers and opt-outs.
Now the endowment review is going just the same way and the accuracy of some of the reporting is scandalous.
Trawling some of the claims' websites, I found this little beauty: “Of the 10 million policies in the UK, over 70 per cent will not provide enough funds to repay the mortgage debt. This will leave these homeowners to find on average an extra £7,000.”
I am not suggesting the figures are incorrect but the language gets my goat. For example: “Seventy per cent will not ” and “this will leave investors ” They are talking as if it will definitely happen. None of this is for sure, so why do they use this sort of tone? How do they know that world events conspire to make markets boom again? Or indeed, go bust?
But if you feel that your average investor understands why they are being compensated, you would more than likely be wrong. Because of the press coverage of performance, the public think they are being recompensed for that. Every last person I have spoken to who has put in a claim and been awarded compensation thinks it is because of poor performance; little do they realise it was invariably because they were advised to cancel a previous plan.
But what this means is that performance is the villain now and we all have some funds that have done badly, so we are all suddenly villains who need to be taught a lesson.
And the problem of inflammatory language reaches far and wide – a while ago on the BBC's website there was an item on endowment misselling. It featured a member of the public who felt he had an issue with the sale of his endowment, but who seems to have no comeback as it was sold in 1985 “before the legislation came into effect that required anyone giving financial advice to be authorised to do so”.
“He believes he was missold his policy, which is now also facing a shortfall of up to £6,000.” The item goes on to state: “The bad news for Mr Bullivant is that his policy was bought through an independent financial adviser (IFA) before their sales were regulated.”
It turns out later in the article that it would appear it was not an IFA after all. Drag our reputations through the mud and quietly cover yourselves by saying it might not be an IFA after all.
Oh, and add a disclaimer at the end just to be sure – “The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.”
I wonder if there is a friendly legal expert out there who could give us a get-out clause along the same lines,just in case?
Tom Kean is compliance officer at The Analysts