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Why has the FCA failed on unauthorised pension switching?

Heath-Greg-Derbyshire Booth-peach.jpg

Who’s afraid of the big bad wolf? It is a nursery rhyme I grew up with that recently struck me as rather ironic given the current state of UK financial services regulations. Let me explain.

Like many other small IFAs across the UK I have seen a huge increase in the last 12 months in the  number of people calling me worried about ‘advice’ they have received to move their pension from its current provider, normally to a self invested pension of sorts.  It normally starts with a telesales call. ‘Can I speak to Mr Smith about his pension scheme’.  Once they are talking to Mr Smith it goes something like this: ‘We are ABC and we have been appointed by the Government to do a free review of your pension funds.  You may have seen our adverts – The Money Advice Service or Ask Mas?’

Other telesales lines are similar; ‘It’s about your final salary pension scheme.  Did you know that if you died your spouse gets nothing?’ Or ‘did you know that your pension fund is performing badly? and there are better alternatives out there.  We can sort this out for free’

Our small practice has received four such enquiries in the last month. Luckily those clients had the sense to ask their employers or scheme trustee at work who directed them to us. We managed to track all the companies who made the initial telephone call. They are all marketeers. But never fear. In the smallest font possible on their website at the bottom it says ‘we are not regulated by the UK authorities and we do not give financial advice’. 

When I challenged them on giving advice the reply I received was ‘we don’t’.  I explained my clients thought differently, and that I will have to report them to the FCA. Just wait until they get their teeth into this one I thought. 

As it turns out, the FCA is not a big bad wolf but more of toothless gummy bear. I tried the MAS to get them to take action, but to no avail.

These four clients are the lucky ones. Two clients I dealt with a month ago both had been ‘advised’ to move from  a final salary scheme into a Sipp. The firm is now in default and both my clients went to the administrators meeting with my encouragement.  They were both incensed to hear the old directors explain they were moving on to their new roles – as directors. We are now awaiting redress from the Financial Servies Compensation Scheme, and I await the bill I will inevitably have to pay as a result for something I never did.

The FCA are meant to protect the public and on this issue they are failing badly.  

Often we find via Companies House that the marketing companies and introducers of varying degrees are all the same directors and operating from the same addresses.  Every step takes between 1 per cent and 3 per fees plus ongoing annual fees. 

And all this is couched as free advice.

Meanwhile I sit in my office writing a drawdown report. I am on page 47 of technical waffle, and all because I am giving the client what they asked for in the first place . And yet the merry-go-round of regulators and marketeers goes on, all paid for by my small practice and my clients.

Greg Heath is managing director at Derbyshire Booth



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Incompetent Regulators 2nd July 2014 at 4:23 pm

    Incompetent Regulators, say no more!

  2. I had one yesterday. Matches the examples in the article. Existing pension performing badly. used the low projection rate (of -1.5) to tell the client they were losing money. Yet it had grown by over 8% a year in real life. I phoned the existing provider to warn them only to be told they policy was flagged by their financial crime dept already (thankfully). I have just completed a financial crime report and send in but I don’t expect much to happen. This one wanted to transfer the stakeholder pension (for an low earning, inexperienced investor) into a SSAS investing in offshore property. Three of the four companies involved where working off the same industrial estate.

    This is not the first unregulated/free pension review case I have seen this year. The regulator seems to pick on the minor issues and totally avoid the big ones. I have had several cold calls about pension reviews (amongst the PPI calls) personally. They are rife and need dealing with.

  3. Scandalous that this is allowed to continue. I simply don’t buy the excuse that the FCA doesn’t regulate these firms and, therefore, nothing can be done. YES IT CAN.
    If the regulatory powers don’t yet reach this dark and murky corner. then change them. Legislators have the power to do whatever is in the public good – not just the power, but I would argue, the obligation

  4. Gordon Sinclair 3rd July 2014 at 7:03 am

    One of the issues is that, under a SSAS for example, any man and his dog can be scheme Administrator (there are some exemptions for Trustees) so its a bit of a free for all for anyone wanting to extract money from scheme or do dodgy investments.

    HMRC are mainly to blame for this as they removed the role or Pensioneer Trustee which prevented a lot of this from happening.

    If these people are giving advice and are nor regulated then this is a police, not an FCA matter.

    What the FCA need to do is their main responsibility – protecting and educating the public.

    Tweeting information and expecting the man on the street to look at their website is not good enough.

    How many non financial savvy savers would even think to look at the FCA website?

  5. Martin Bamford 3rd July 2014 at 7:36 am

    Time for IFAs to stop offering ‘free’ pension reviews and start charging for their professional services, to remove the illusion that any such thing as ‘free’ advice exists?

  6. Philip Castle 3rd July 2014 at 7:41 am

    We record the phone calls from these charlatans and string them along getting them to make statements which are advice, work out where they are calling from and then send the recordings to the FCA… nothing ever seems to happen after that other than an email saying it has been noted.

  7. Julian Stevens 3rd July 2014 at 8:49 am

    I’ve lost a couple of clients who’ve been persuaded to move their pension funds into “better performing” SIPPs, though whether or not they’ll get what’s been promised is open to doubt. I couldn’t be bothered to try to find out just what these other schemes are, whilst the FCA seems to be more fixated with heaping ever more rules and regulations and “guidance” onto honest and legitimate authorised firms. It’s just par for the course.

  8. Gordon Sinclair makes a very good point “how many savers (savvy or not) really check the FCA register ?

    My bet is its really low to non existent, I bet the main traffic to the register is from companies, us, press and cmc,s

    It really is time the FCA started to publicly back up the benefits and protection the consumer gets from regulated and FCA registered adviser’s, listed on their register, and spell out if people don’t check and deal with these sharks not only will the advice be bad (in all probability) but you face loosing all your money and a long battle to try and recoup some of it !!
    Because lets face it, the man hours and work and lets not forget the expense of them (the FCA) chasing all of these charlatan’s would be huge !! and I suspect fruitless.

  9. What prompted me to write this article was the numbers coming through these days. With auto enrolment and MAS advertising it has become an easy number for the marketeers. The latest one has lost his pension completely we think (although that is blatant fraud). The irony is he will get a HMRC bill for the actions of someone else. However it all started with a telesales call.

    Meanwhile the FCA and MAS say they are powerless to act. I find that hard to believe given their mandate and powers.

    Today one of our administrators told me her husband had been targeted. Luckily she knew the signs and told them what she did for a living. They quickly ended the call. She admitted that they sounded very official, knowledgeable and very important. The average person out there is ripe for the picking and our regulatory system has made it easier than ever in my opinion.

    It really has become the perfect storm and it needs to be stamped on urgently.

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