Money, money, money

Urgent news

(1) Recovering the money: TPR has announced that it is seeking to recover around ￡300,000 from Patrick McLarry who got five years jail for abstracting ￡250,000 from the pension scheme he was corporate trustee of (Fraudster jailed for raiding charity pension, TPR Press Notice PN20-06, 10 February 2020). Unless he returns the money plus interest plus TPR costs of ￡72,000 he will have to serve another three years. In practice that normally works out as 2? years in jail for theft plus 18 months for not returning the money.

There are some curious features about the fraud. TPR say the money was used to buy a house and warehouse in France, a house in Hampshire and repayment of a debt on a pub in Portsmouth. That’s pretty impressive, given property prices these days. Second, a Crown Prosecution Service prosecution would probably have been cheaper; can a convict complain about poor value-for-money in prosecutions (which he has to pay for) and the absence of competitive tender. Third, to repay ￡300,000 after tax would mean he would have to earn around ￡500,000 – so 18 months in jail to keep ￡300,000 seems good value, however awful the food might be. Finally it would be amusing to learn how much of the money claimed in proceedings by TPR, and announced in triumphant press releases, actually ever gets paid.

(2) Stealing the money: Of course, being a sole trustee is the easiest way to steal pensions money. But the lower-level thefts by non-trustees involved in pension scams can be only slightly less profitable. An astonishing piece of research by the Police Foundation (see Michael Skidmore, Protection people’s pensions: understanding and preventing scams, The Police Foundation, September 2020) acts as a primer for the budding criminal and shows how the combined efforts of TPR, FCA, IS, HMRC, ICO, police and SFO are not doing much to help citizens who have been given the freedoms to have their pensions stolen. The reasons are set out in the document, but the real cause is the fragmentation of responsibility, so that the buck does not stop anywhere. The House of Commons Work and Pensions Select Committee is sensibly exploring what to do about pension scams, but thinks that stronger powers for TPR might do the job, which of course they will not.

Unusually, the National Crime Agency is not mentioned in the report – nor is Action Fraud. The police, whose job is to catch the bad guys, complain they are ill-equipped and under-financed – and that it looks all too complicated. Because it’s written by the police, the Foundation Report passes the grenade to TPR. In fact, pensions fraud is relatively easy even for Mr Plod to spot and prevent; maybe the FCA and TPR should surrender some of their budget to the police and give them a computer, a subscription to Google, and an office. They do wear a uniform, and they are at least trained.

(3) Repaying the money The FCA has been criticised for issuing its consultation on its own liability to pay compensation for its mistakes during the summer holidays and then allowing only 8 weeks for responses (see lots of adverse press comment including Jim Armitage, Don’t let the FCA bulldoze through its compo curbs, Evening Standard 9 September 2020). There are suggestions the FCA might have to pay out for at least three of the higher profile scandals: Connaught, LCF and HBOS Reading, amongst many others. It’s all a bit tricky because any fines it raises go to the Treasury, yet any compensation it decides to pay is paid for by the industry. The consultation document is 62 pages long (Complaints against the regulators, Consultation Paper FCA – CP20/11* -PRA – CP8/20, July 2020, not easy to find on the website), and it’s too late now to respond. It clear that if a regulator causes damage it is not liable (it has statutory immunity). Rather generously it says it will however at its own discretion award up to ￡10,000, based on its own judgment of its own behaviour. The levels look rather modest in the light of the sums of ￡85,000 guarantee for depositors, paid for by the industry, and ￡350,000 that an IFA can be forced to pay by the Financial Ombudsman Service which can ignore the usual judicial checks and balances. Maybe citizens would be better protected if the Senior Managers Regime were applied to FCA senior officials.

Deficits

Not many younger pensions people can remember pension surpluses, but they were common before funding obligations were statutorily imposed, and in fact provoked calls for controls on overstuffed pension funds. Happy days. The forthcoming TPR suggestions for even tougher obligations on funding dying DB schemes has been discussed elsewhere, but it might be refreshing to look at the Pensions Protection Fund 7800 index (which should really be called the 5,600 index nowadays; unlike the real universe, the pension universe is shrinking). It shows that the combined deficit of UK pension schemes fell from around ￡200B in July to around ￡140B in August. A ￡60B drop in a month is some achievement – and puts the current travails of the USS scheme currently in the news in some context, although the proposed USS 70% contribution rate may be a struggle for some universities to find in the absence of high-paying Indian and Chinese students. Another couple of months of this kind of investment and liability performance and the trolls will have to dig out what they didn’t write about surpluses thirty years ago (before social media was born). It is always good to invent another scandal.

By the way. . .

Mrs Trellis from North Wales has bought a new Biro. She writes: 'Dear Mr Webb. You are Minister for improving pensions. I have just had an awful week in a B&B in a rainy Calais with disgusting French food. I thought TPR were there to help, but they say they don't care about French pensions. Or hotels.'