Pension investors need tougher action on charges

It is significant that it was the effective and sadly defunct OFT not the dozy FCA that sought to bring the industry to heel.

At the time many of us said: “Fantastic! Now what about personal pensions?”

At least a quarter of adults have money invested in the £400bn non-workplace pension market dwarfing the £168bn invested workplace defined contribution pensions.

At least a quarter of adults have money invested in the £400bn non-workplace pension market dwarfing the £168bn invested workplace defined contribution pensions

Consider: an extra 0.01 per cent in charges on this is worth £40m a year. Over 30 years – a reasonable length of time for pension contracts – £1.2bn could be swiped from investors.

So why has it taken a further four years for the FCA to unveil a discussion paper on non-workplace pensions?

Laudable though this is, it raises as many questions about the FCA as it does about the pensions industry.

Take this, for example: “Through this project we would like to understand the level of annual management charges (AMC) on non-workplace pension funds, including to what extent and why they differ from the AMC on workplace funds, particularly where the same funds are available in capped workplace schemes and stakeholder schemes.”

Or this: “We would like to understand to what extent the charges on pre-2001 policies remain at pre-2001 levels in non-workplace pensions.”

Are these not things the FCA and its predecessor should have understood a very long time ago given the widespread coverage of the potential consumer detriment being caused?

The FCA further said it was “concerned that some older personal pensions may have a relatively high AMC when compared to modern versions of the same fund (bundled or unbundled), even within the same firm/scheme.”  Well it jolly should be concerned. That is what it is there for.

Even the word “concerned” conjures up the image of a hapless old uncle rubbing his hands together while clueless about how to tackle a problem.

The FCA's own thematic review of the fair treatment of long-standing customers in the life insurance sector cited an example where the annual charge on a pension increased by 6 per cent when the policy became paid-up and, 22 years later, an exit charge reduced its value by more than 50 per cent. 

Investors have been – and remain – exposed to vultures who pick over the bones of their savings.

A discussion paper is all very well, but it does feel like yet more jaw, jaw when what investors need is war, war.

Interest-only mortgage woes

Radio 4 featured a listener who had taken an interest-only mortgage in 2004 and had four years to pay it off. She had not repaid any.

While older interest-only mortgages backed by failing endowments was a problem created by insurers and salesmen, more recent ones are a different issue.

Homebuyers with unrealistic expectations were encouraged by mortgage brokers and lenders to borrow with no expectation of repaying.

As a short-term stop-gap or for those with other resources, interest-only products might have a place. But this woman was sold a 10-year deal.

She said her repayments had dropped when she remortgaged at the end of that deal, yet she appeared not to feel any responsibility for her failure to use that money to tackle the problem. In fact the question was never asked.

So, we have a looming crisis created this century where lenders, brokers, regulators and consumers were all complicit. I wonder who will carry the can for this one?

Cyber-bullies are cowards

What would make a company director, trade association chairman and chairman of a local rugby club choose to bully someone half his age through social media?

Patrick Bunton has surrendered his roles at London & Country and the Association of Mortgage Intermediaries – and failed to comment on allegations made by England fly-half Freddie Burns.

Trolling was not born in the internet age. When I worked at the Daily Mail I had an area of my notice board dedicated to what we then termed the green ink brigade.

There was the one who likened my photo to an evil imp. Another told a colleague she was the “spawn of the devil”. We laughed these off. 

But internet trolling can be in a different league. It is often personal, persistent and, through anonymity, indisputably cowardly.

There may be legitimate reasons why someone would wish to comment on industry issues without revealing their name, but to hide behind an alias in order to abuse others is beyond contempt.

Tony Hazell writes for the Daily Mail's Money Mail section