Sometimes an event happens that brilliantly sums up everything you ever thought you knew.
For me that moment came with the £24m fine that Prudential was hit with for annuity mis-selling.
I was at the Daily Mail when it was the first paper to campaign for an overhaul of the annuity market, and it was the tales of customers of the Pru that drove that agenda.
We had baskets of letters from savers who had been deprived of the annuity they deserved: sick individuals who had months left to live, widows who thought their husband was sold a joint-life annuity, and savers lumbered with rotten rates.
We campaigned hard. I suppose you can partly blame me for the pension freedoms.
How many scandals now have been fuelled by financial incentives to sell?That was the end result of the consumer pressure to end the disgrace of annuity mis-selling.
As well as the £24m fine, the Pru is facing a £250m compensation bill for those mis-sold.
That is poor consolation for those customers though, many of whom will have serious medical conditions and will have struggled for years on pensions far lower than they should have had.
How many scandals now have been fuelled by financial incentives to sell?
Sales targets and financial advice are just not aligned. Whichever way you cut it, at some point the person doing the selling will act in a way that allows them to hit a bonus, not do what is right for the customer.
To highlight what a mess we are in as far as retirement planning goes, the Pru fine came just days after Financial Conduct Authority figures showed that 48 per cent of savers who had taken their pension in 2018-19 had not taken financial advice.
Just 37 per cent were advised. Of plans that were fully withdrawn, almost two-thirds were not advised.
You can make of the FCA figures what you wish – the fact is, we do not have the full financial picture of the individuals behind the numbers.
For example, we know the vast majority of people who fully withdrew their savings had a small pot.
But we also know that there were 355 people who fully withdrew more than £250,000.
They will be the ones with the Lamborghinis then.
And we also know that the average annual withdrawal rate for those with sums of less than £100,000 is 8 per cent.
But we also know it is 2 per cent to 4 per cent for those with more than £250,000.
It is interesting that there is growing criticism of the pension freedoms, but the Pru case perfectly sums up why we are where we are.
Critics of the current regime seem to forget the utterly unacceptable situation we were in and do not seem to have any answers about what we should have instead.
Occasionally you hear mooted suggestions for a guaranteed minimum income before you can access the freedoms.
However, this is just freedom for the rich, but not the poor – which is not an ideal situation.
The solution has to be an advice market open to everyone.
The problem is cost. We need to find a radical way to fund retirement advice.
I have said before, employers need to come up with a solution.
More radical still would be if it were to come from a levy docked from pension funds every year – a tiny fraction of a per cent put aside to pay for some very simple financial advice.
Truly independent advice is the only way to steer through more scandals in the future.
Look to yourself
One of my ongoing gripes at the moment is the PR campaign by the Association of Investment Companies to score points over unit trusts regarding liquidity.
The Neil Woodford scandal raised legitimate concerns over the holding of illiquid stocks in open-ended funds.
But where was the AIC to warn of this before Mr Woodford had to gate his Equity Income fund?
Its rhetoric now seems solely designed to push savers into investment trusts.
And it conveniently forgets that the investment trust sector has some very serious unanswered questions of its own over the Woodford affair.
His Patient Capital trust has fallen heavily and has been riddled with accusations that the board lacked independence because of its link to Mr Woodford.
Probably better to fix the hole in your own roof before laughing at your neighbour’s leaks.
Google it
Another week, another reader points me to a rogue investment website that has popped up on the internet.
There it is, offering returns of 7 per cent a day (yes, I know), hiding in plain sight.
One day someone at the FCA enforcement division must learn to use Google.
James Coney is money editor at the Sunday Times
@jimconey
