PensionsJun 28 2019

Pension problems and more Woodford woes: the week in news

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Pension problems and more Woodford woes: the week in news

As tensions rise in the race to No 10, police are called to Boris Johnson’s house and the threat of a no deal Brexit reared its head once more, the news has been dominated by the Tory leadership contest.

Closer to home, the Woodford saga continued and pensions headlines made a splash. It’s time for the week in news.

1 Government's case extinguished

In a landmark pensions discrimination case, the Supreme Court ordered that the government’s changes to judges and firefighters pension schemes were discriminatory.

The Fire Brigades Union has been battling the changes since both judges and firefighters defined benefit schemes were closed in 2015. In December, the Court of Appeal said the government had discriminated against the two groups.

According to the union, the Supreme Court ruling was the last legal hurdle in the dispute — leaving the government with no further avenue to exhaust — and FBU said it felt “vindicated”.

Over the years, the FBU had initiated more than 6,000 Employment Tribunal claims alleging the changes had amounted to unlawful discrimination.

2 Paperwork problems

Problems with Aviva’s policy documents left an adviser frustrated that his client could be handed a 40 per cent tax charge, FTAdviser revealed.

Philip Wise, chartered financial planner at Informed Choice, filed a complaint with the insurance giant after his client was unable to access death benefits as drawdown despite the provider's key features document for stakeholder pensions stating this was a viable option.

The client, who could now face an £100,000 tax bill on the £250,000 pension her husband had left with Aviva, wanted to take a drawdown option to avoid the inheritance tax levy.

Aviva appeared to initially uphold the complaint, admitting they had not provided the correct description, but have since backtracked and told Mr Wise to take his complaint to the Financial Ombudsman Service.

3 A (fourth) week of Woodford woes

This week did not improve for the once revered fund manager Neil Woodford as he was criticised by both the Financial Conduct Authority boss and the Bank of England governor.

Mr Woodford has had a tumultuous month since he had to suspend his stricken Equity Income Fund on June 3 following outflows in May of £9m a day.

He has since been selling assets to raise cash for the fund and this week sold shares in two illiquid companies to raise £100m — above the value at which the funds were held in the fund, meaning he was able to sell the stakes for higher than he expected.

That was little relief for Mr Woodford however as FCA boss Andrew Bailey blasted what he called a "conflict of interest" at the heart of Neil Woodford’s suspended Equity Income fund.

He was referring to Mr Woodford’s hiring of Duff and Phelps, which did the valuations in the fund, but the regulator said the administrator should have done the hiring instead.

BoE governor Mark Carney then said open ended funds offering daily dealing when having significant investments in illiquid assets, such as Woodford’s, were "built on a lie".

Mr Carney told a select committee funds that it might be better for investors not to be able to access their cash on a daily basis.

4 Waspi review worries

A pensions expert warned that a judicial review decision could have widespread implications for the pension industry this week as the issue of women's state pension age continued.

According to Ian Browne, a pensions expert at the wealth manager, if the High Court decides that the government didn’t communicate clearly its decision to increase the age at which people can retire, that will set a precedent about what counts as proper disclosure of information.

He said the pension industry had been pushed to disclose more and more over the last few years and that providers will have to face how they can ensure people comprehend and engage with this information.

Plans to increase the state pension age were first announced in the Pension Act 1995, and then accelerated as part of the Pension Act 2011, but campaign groups The Women Against State Pension Inequality and Backto60 have claimed these changes were implemented unfairly, with little or no personal notice.

5 Don’t pass go

Two men were jailed this week over an investment scam which saw 350 victims lose £6.2m.

Craig and Malcolm Brooks, aged 37 and 36 respectively, were sentenced to one year each after running firms, Bric Global Ltd, Citygate Capital PLC and Rare Earth, which cold called victims and convinced them to invest in carbon credits and “rare earth metals”.

City of London Police’s fraud squad began investigating the duo back in November 2010 after victims told them the company created obstructions and delayed any return of funds when investors asked for their money back.

So far, a total of £500,000 has been recovered by police, and a further £300,000 in assets has been identified and ordered to be paid over immediately — all of which will be used to repay victims.

imogen.tew@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.