THERE’S nothing quite like desperation to create opportunities for exploitation.
Payday lenders are perhaps the most visible example of firms taking advantage of financial hardship, but pension liberation schemes are right up there with them.
These are the companies claiming to help struggling individuals by giving them premature access to their pensions.
The schemes have raked in an estimated £400 million since 2008 by allowing people to unlock their pension funds before they turn 55.
They get around the pension rules by asking the individual to transfer their pension fund to a separate scheme.
The risks to those individuals are enormous, as reported in The Scotsman’s Smart Money pages last weekend. The fact that it means raiding the savings pot that’s meant to support them in retirement is just part of it. Some of the money is then invested in high-risk assets such as offshore property, with the potential for that capital to be wiped out entirely.
Then there are the high charges levied – up to 20 per cent of the pension cash “liberated” – and, last but not least, a likely HMRC tax hit. People using the schemes can suffer a 55 per cent tax charge on the amount that was transferred.
What once seemed a lifeline can quickly become a nightmare. Several of the schemes have thankfully been shut down, while the Pensions Regulator last week stepped up efforts to raise awareness of their activities.
But they’re smart: like payday lenders, these firms are very persuasive in their claim to offer what seems a logical and easy way to alleviate financial problems. Some will be stopped in their tracks, but for many people the damage has been done – and it will all too often be irreparable.
Jenkins’ actions need to match his words
He has positioned himself as the great reformer, overhauling the public perception of an organisation beset by scandal and stuck in its old outdated ways.
Does Barclays boss Antony Jenkins remind you of anyone? It’s a polished performance and many investors have bought into it. But unless the strident words are matched by deeds, Jenkins will disappoint, much like the Prime Minister, who he might as well be modelled on.
Jenkins talks convincingly of the need for a new culture at the bank, after its shameful role in the Libor and payment protection insurance (PPI) mis-selling scandals.
To be fair, some of the early signs have been encouraging. He has indeed taken steps to break up the sales incentives and remuneration structures that have contributed so much to the bank’s failures, hopefully leading the way for others to follow.
Last week Jenkins, who has given up his annual bonus, announced that the bank was slashing some 3,700 jobs and deferring 2012 bonus awards.
Is this deception, though? The bonus deferments are exactly that, meaning they will be paid in tranches over the next three years (a strategy that comes with tax benefits), while thousands of others are getting cash bonuses almost three times their previous amount.
The total bonus pool is down, but still worth £1.85 billion. This is the bank fined £290 million last summer for Libor fixing, facing a PPI bill of £2.6bn (and growing) and building a compensation pot currently worth £850m for SMEs mis-sold interest rate-hedged products.
But Jenkins insists that times are changing: “There will be no going back to the old ways of doing things,” he said.
“We get it. We are changing the way we do business, we are changing the type of business we do and we are setting a new course for the future of Barclays.”
The Barclays man comes across as a product of the same PR school as David Cameron. Let’s just hope that in Jenkins’ case, the words amount to more than empty and ultimately dangerous rhetoric.
Cameron is – so far – getting off the hook, thanks to the nation’s collective amnesia and the London media’s failure to challenge his woeful government, but Jenkins must be held to his pledge that the “old ways of doing things” really are consigned to history.