Jeff Prestridge  

Steel-ing staff pensions

Jeff Prestridge

Jeff Prestridge

When I started my career as a financial journalist in the 1980s, one of the first scandals that hit me between the eyes was the mis-selling of personal pensions; a Margaret Thatcher invention.

I remember it well; workers were encouraged to transfer pension benefits accumulated under an occupational scheme into a new-style personal pension. They were promised the financial earth, but in reality given a pittance in return.

Prudential was one of the guiltiest of those involved in the mis-selling scandal, although it took a while for the firm to admit it. In 1994, chief executive Mick Newmarch gave a “total reassurance” that Prudential was not guilty of mis-selling. Four years later, with more than £1bn put aside to cover the expected costs of its mis-selling, new Pru boss Sir Peter Davis came clean.

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Before a probing Treasury select committee, he apologised for the “suffering and loss” people had experienced as a result of the pushy financial advice given by Pru’s army of salesmen, while taking a side-swipe at Margaret Thatcher’s government for its backing of the new personal pension revolution.


Dejà vu

Today I fear a similar scandal is beginning to bubble to the surface. Prudential is nowhere near it, but some of this country’s army of financial advisers are up to their neck in it. Shame on you.

The similarities with the 1980s are scary. Like the birth of personal pension mis-selling in the 1980s, government rule changes are the trigger for the worrying bubbles; this time around, George Osborne’s pension freedom rules, which kicked into force in April 2015.

In theory, pension freedom is a good thing, giving people greater control over how they use their retirement funds as they near retirement, enabling them to avoid the yoke of being trapped in a poor annuity deal for ever more.

But it is a freedom that some advisers, like the Pru salesmen in the 1980s, are now exploiting for their own financial gain. They are encouraging workers to transfer out of perfectly good occupational pension arrangements, parking their money in a Self-Invested Personal Pension (Sipp). Sometimes the transfers make perfectly good sense, sometimes they do not.

Reports have recently emerged of steelworkers at the Tata plant in Port Talbot being targeted by unscrupulous pension transfer advisers. They have attracted special attention, because members of the British Steel Pension Scheme must soon decide whether they should move their pension benefits to the Pension Protection Fund or a new retirement scheme backed by Tata.

Both choices will result in lower pension benefits for steelworkers, hence the decision of some IFAs (and fraudsters) to target them and persuade them to move their benefits elsewhere.


Indefensible rules

Alastair Rush of Echelon Wealthcare is a financial adviser whom I trust implicitly. He has done some super work in campaigning for former armed forces personnel deprived of their pensions because of indefensible rules.