TPR action on pensions scams and the Railways Pension Scheme

In a major investigative report this weekend, the Times revealed new figures about the potential scale of financial loss to pension scammers, and details of a series of cases that have been brought to regulators' attention but where little or no action appears to have been taken.

The letter published today from TPR describes how it is “currently carrying out seven criminal investigations into scams. These cases cover 52 schemes, have 38 suspects who we are treating as targets, and have indicative losses to savers' pensions of around £55million.They cover a range of complexities and possible outcomes—from fraud and money laundering charges to Employer Related Investments (ERi)”.

In January 2018 the Committee warned that the FCA could be sleepwalking into another huge misselling scandal, after calling on the Government in December 2017 to Ban cold calls now to stop pension scammers. Most recently in May this year the Committee said there was  “No change” in Committee's view on damage caused by contingent charging model and noted that at this point, after a series of consultations, reports and recommendations, it was up to the FCA to either ban contingent charging or prove that there was a better way to stop advisers giving bad advice.

A major problem identified by the Committee in the course of its investigations into pension freedoms was the phenomenon of “phoenix firms”: advisers voluntarily going out of business to avoid compensation claims against them and then simply reappearing under a new name on the inscrutable FCA register—or it requiring “a degree and orienteering skills to figure out which firms” the FCA had banned from giving advice, in the “grossly inadequate” action it did take on the BSPS scammers. In January this year Frank Field wrote to the Financial Services Compensation Scheme (FSCS) on concerns that cheated British Steel pensioners were being "sold short" again under the compensation scheme, after the FCSC resisted FCA urging it to use its discretion, and offer greater compensation to British Steel pensioners “mis-advised” by firm Active Wealth to transfer their pension savings into unsuitable investments.

In the letter published today, TPR says “The Scam Smart website enables consumers to check the FCA Warning List to check if firms are operating without permission or running scams…. usually, the first time that members will learn of TPR's involvement is when we have appointed an independent trustee to take control of a scheme to protect members' savings from scammers. The independent trustee will write to members upon their appointment and, if they suspect a scam, they will inform members. Earlier contact would risk tipping off the scammers who may attempt to steal assets or cover up their actions…”

Railways Pension Scheme

The letter published today also clarifies what action TPR has taken in regard to the Railways Pension Scheme, sections of which “have been on our watchlist since it was established” in 2016. When pressed on the Committee's longstanding concerns about companies paying out handsome dividends and bonuses while their pension scheme falls into dangerous deficit, Charles Counsell erroneously claimed that a Warning Notice had been issued against one of the Train Operating Companies (TOCs) “because of the balance between dividend payments and contributions to the pension scheme … I would like to clarify that TPR was preparing to issue a WN, but this was put on hold in late 2017 because the threat of enforcement action led to a constructive response from the trustee and TOCs to our concerns…”

The Committee also had questions about the potential conflict of interest in TPR's twin duties to protect pension schemes and their members' benefits by ensuring adequate, effective pension deficit recovery plans, and to “explicitly take into account affordability pressures upon employers” that might pose a risk to the viability of the sponsor company. The Committee has previously criticised TPR for what it saw as a lack of timely, effective action in its handling of, for example, BHS and Carillion, and asked TPR last year for examples of its claim that it had previously been accused of “being too tough with sponsoring employers in respect of pension scheme funding.”

In oral evidence in Parliament, Charles Counsell told the Committee that during “the early period of Carillion, 2011 to 2014 […] there was a lot of pressure on us to take into account the health of the sponsoring employer.” When asked about the source of this pressure, he said “the CBI and the Treasury were very keen to make sure that we did not jeopardise the sustainability of employers. Of course, that led to the objective that we were given in 2014 to make sure that we took into account the sustainable growth of an employer.”

The TPR response published today states “Turning to your question on whether the 2014 objective creates a conflict of interest for TPR, investment in sustainable growth that strengthens the employer covenant in turn protects members and reduces risk to the PPF. A tension can arise between our objectives in relation to stressed employers, and therefore, we always seek to strike a balance between these objectives. As an independent regulator we made independent decisions in our complex funding casework prior to the introduction of the 2014 objective and were not influenced by the views of the CBI or Treasury in this regard. I would underline that we are now a very different organisation from 2014 setting out our expectations more clearly, intervening more quickly and being tougher in our action where we need to be.”

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees

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