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Outsourced DB provider hits back at MP probe

Tideway Investment Partners says its activity with two defined benefit pension schemes has been “misunderstood and exaggerated”, in a letter to an MP committee.

Tideway managing partner James Baxter has responded to questions from the work and pensions select committee about the promotion of DB transfers among employees at energy giant EDF and Magnox Electric Group.

Tideway was mentioned in a letter to the committee from the Trades Union Congress in June, which union Prospect said Tideway was “proactively contacting workers” at those companies.

Responding to the committee’s questions, Baxter says Tideway hosted free seminars that were open to the public, but that contact with DB scheme members was through referrals or approaches by members themselves.

He says the location of the seminars is influenced by which workplaces have a high concentration of DB scheme members.

Baxter adds: “We have from time to time presented DB transfer seminars at venues that are easily accessible to those individuals in those schemes. Otherwise, we tend to pick a spread of locations throughout the country close to major conurbations.”

Seminars have been held in London, Bristol, Manchester and Ashford.

The committee asked Tideway how the seminars were publicised among scheme members; how referrals are generated; the proportion of attendees who arrange a transfer; and the way Tideway communicates the benefits of retaining safeguarded entitlements in a DB scheme.

According to Baxter’s response, 26 members from the EDF/BEGG DB Pension Scheme, and three members from the Magnox scheme had completed or are in the process of completing transfers with Tideway.

The average value of the transfer from the EDF/BEGG scheme was £1.2m while the average value from Magnox was £770,000.

Baxter says: “Members who transferred with us from the EDF/BEGG scheme in 2016 are materially better off today than they would have been had they stayed in the scheme under any reasonable set of assumptions”.

This claim, he says, is evidenced through a combination of the scheme early retirement factors, the scheme tax free cash commutation factors, annuity costs falling and investment returns made to date.

On the seminars, Baxter says: “We never contact members directly or proactively, we work only on referral.”

However, he says the seminar details are published online and the firm emails its existing customers letting them know times and dates.

Baxter adds: “About 400 people have attended from all schemes and all our seminar activity. To date around 15 per cent of those attending have gone on to complete transfers with us.”

Baxter says the benefits of staying in a DB scheme are communicated to members at the seminars.

He says: “I start all seminars with a clear explanation of the transfer of risks and responsibilities that come with the transfer of cash in a DB transfer.”

He adds: “I make it abundantly clear that the default position is to stay in the scheme and only where there are significant improvements to the members’ financial and a sensible plan for safeguarding the money post-transfer does it make sense to consider a transfer.”

Baxter dismisses any claims of financial interests for Tideway advisers advising clients who transfer from DB schemes.

He says: “Tideway transfer advisers are fully employed with generous basic salaries and categorically have absolutely no financial interest in whether the individuals they advise transfer or not.”

St James’s Place chief executive Andrew Croft has also defended seminars it hosted for British Airways pilots that resulted in people transferring out of their defined benefit pensions.

SJP responded to questions from the committee where it also revealed the FCA included 65 of its cases in its suitability review in May 2017, with 93 per cent of the cases found to include suitable advice.

The appendix says: “In addition to this wider review of advice, the FCA has reviewed a small number of defined benefit transfers advised on by [SJP] and has found them all to be suitable.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. As with all witch hunts, DB Transfer advice has become like the Salem witch trials. The same principles are being applied. If you have advised to transfer you must be guilty.

    The damage being done is horrendous, many have pulled their DB advice from market. The real stupidly being no one will know the true outcomes for years to come, yet seek to judge based on hear say and speculation. A few years of increased interest rates, guilt rates and above 5% inflation would prove otherwise. Could this happen? who knows.

    The real damage being that those consumers looking for DB advise are more likely to land up in the hands of fraudsters than good adviser, due to the continued witch hunt and PI insurance issues, resulting in many advisers electing not to get involved.

  2. Has the TSC taken over the FCA duties ? or has the TSC lost all faith and respect for the FCA…. sure seems like it

    Either way a lot of useless over paid Chiefs and not enough Indians as they are all wasting their time on fools errands…. washing coal!

  3. I’m not sure what the motivation of the firms delivering seminars is, but are MPs now telling the financial Advice industry not to raise awareness or provide financial education? If they believe the only issue involved in talking to a client at retirement about their DB pension is whether to transfer, they clearly don’t understand how such schemes work and the importance of at retirement advice.
    I’d be very surprised if those seminars hadn’t gone through some pretty stringent compliance and would have covered issues around taking tax free cash, spouses benefits, what to expect from the state pension, what to do with other funds, as well as the benefits and pitfalls of transferring. The fact the firm above transferred 15% seems a reasonable number and if they were also giving advice about other elements of the scheme and advice to members with other pensions/savings, surely that’s a good thing?
    Such rubbish from a small number of MPs will only prevent people seeking advice at a time they need it the most.

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