How safe is my pension?

jimjames

Much of my FCA authorised investments were in an ISA. Doesn't seem too off piste and certainly didn't at the time.

As above an ISA is just a wrapper. You can have a huge range of investments inside an ISA including penny shares that are high risk. What were the exact investments that you lost money on from fraud? The only investment I've had that has failed in over 30 years investing was Woodford Income and that was only a small part of my portfolio and not due to fraud from the IFA.

QrizB

I'm just as baffled by this as everyone else.

In the past, I have lost a substantial amount of money by several FCA authorised firms “going bust” due to fraud perpetrated by the directors of the company and their associates.

Most people get through life without having a single investment firm go bust due to director fraud. To have had this happen to you multiple times does make me wonder how you ended up in that situation!

More details would let us understand whether you've just been fantastically unlucky or whether there's something else going on.

westv

The OP has 806 posts. Do any of those offer any insight into their pension "selections"?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82135503#Comment_82135503

One possibility is that their money was in P2P type investments in a IFISA.

A number of P2P companies went under due to actual fraud, or at least sailing very close to the wind/ risky business models.

robatwork

If they failed, name names as it will be public information anyway.

Woodford? LCF?
Or going back to the one which affected me and made me and I guess many on here personally extremely cynical about micropal/S&P ratings… Equitable life. AAAAA 5* rated. But that wasn't an investment scheme but a whole massive company of course.

michael1234

No problem naming. Abermarle was spot on (although only FS was an isa for me). These barstewards didn’t just go belly up, they were involved in various levels of fraud. For me that was Lendy, FundingSecure and Colateral. A small amount of my overall but still a lot of money.

The reason I delayed naming is because it’s a bit of a distraction from my question. The reason they went into administration was mostly due to the integrity (or lack of) the people running it and the controls that were toothless.

I was hoping someone would tell me why it would be virtually impossible for any FCA regulated platform dealing in stocks and shares to steal our money. I don’t see much difference in the regulation of these companies vs the ones that did take my money. Yes those were p2p but both take your money and claim to invest it somewhere.

I asked directly, how do I know that the numbers I see on the screen are reality? Who checks those stocks are correctly held on my behalf? As far as I can see, most of the time the person that does that reconciliation is the broker itself. There is nobody (as far as I can see) that will do something as simple as checking the various stocks the company manages match that paid for by its customers. Checks that the cash in the client account is and has never moved elsewhere. Etc etc. All those checks are carried out by themselves or other companies they own.

dunstonh

Having seen it time and time again (admittedly with not exactly mainstream but fully regulated FCA companies) I'm very surprised that pension provider companies don't have stronger checks in place.

Just because a firm is FCA-regulated doesn't mean that all areas of their business fall under that and get FSCS protection.

One change that probably has helped (and it's still early days, but there are some regulation changes coming up which link into those changes), the manufacturer of products that are retailed to consumers have to identify their target market.

No problem naming. Abermarle was spot on (although only FS was an isa for me). These barstewards didn’t just go belly up, they were involved in various levels of fraud. For me that was Lendy, FundingSecure and Colateral. A small amount of my overall but still a lot of money.

P2P was generally regarded as the Wild West before regulation. Even in the early days of regulation, it was still pretty poor. It's one of the reasons why most people were kept away from it, or, if they used it, only put tiny amounts in.

I was hoping someone would tell me why it would be virtually impossible for any FCA regulated platform dealing in stocks and shares to steal our money. I don’t see much difference in the regulation of these companies vs the ones that did take my money. Yes those were p2p but both take your money and claim to invest it somewhere.

You can't compare mainstream regulated unit-linked investment funds with P2P.

There is nobody (as far as I can see) that will do something as simple as checking the various stocks the company manages match that paid for by its customers. 

That's not what the pension provider is meant to do. That is the role of your financial advisor or you if you choose not to use a financial adviser. The provider or platform facilitates yours or your advisor's instructions. It doesn't carry out research on the investments that you or your adviser selects.

michael1234

The provider or platform facilitates yours or your advisor's instructions. It doesn't carry out research on the investments that you or your adviser selects.

There is something fundamental here I am not explaining very well. If I buy a grand's worth of VXUX then I'll see it listed in my portfolio of the sipp provider (or broker) on my screen. How do I know that £1k went to allocate some VXUX against my name versus going towards the director's next holiday ? This is so fundamental it must apply to every type of financial institution. None of this has anything at all to do with researching my investments or indeed p2p.

Malthusian

How do I know that £1k went to allocate some VXUX against my name versus going towards the director's next holiday ?

You don't, but if you are with one of the major SIPP providers, when you tried to sell the VXUX and it turned out to be missing, they would replace the £1k the director stole out of petty cash.

"What if they were stealing £1k from every customer?" Well, at that point you have to ask how nobody is spotting all that company money walking out of the door. Their customers aren't just investing thousands of pounds, they're withdrawing it as well, and that money needs to be found every day. Without droning on about audit processes too much, there are a lot of eyes watching the money and a lot of hands moving it that the director somehow needs to evade. And even if they did steal £1k per customer, most providers would still be able to make customers whole while only taking an embarrassing knock to their profitability.

If a director wanted to use their position to extract £1k towards a holiday, it would be much safer to ask for a pay rise. Or get themselves sent to a conference in Florida on the company credit card.

Let us suppose that someone like AJ Bell did go under completely and all the money was gone, leaving ordinary (albeit well-off) investors facing the loss of 6-figures or millions, the FSCS having confirmed that they nominally only cover £85,000. Let's leave aside that a theft of this magnitude is, for all intents and purposes, logistically impossible. This would be an unprecedented financial scandal; every previous major scandal has involved investors who were overexposed to a single company (Equitable Life, Allied Steel, Madoff). There has never, in financial history, been a case where investors holding diversified portfolios via mainstream providers providing returns in line with the global market suddenly found their investments had vanished. (Unsurprisingly as it is logistically impossible.)

If the government did not step in to cover losses, the retail investment market would be obliterated overnight, as nobody could be certain that the same would not happen to them. And since this would be a Very Bad Thing not just for the City but for the entire economy, we can safely assume the Government would step in and ignore the £85k limit.

P2P was completely different. The money went exactly where customers were told it was going. Dodgy loans to companies nobody had ever heard of.

michael1234

I don't see how anyone would know the money is "walking out of the door" unless they have access to the custody systems that show how much of each asset is actually owned.

Or if they are involved in the CASS reconciliation. Or there is a run on the platform. Or the director gets too greedy and steals too much.

I agree with you about the impact of a large broker like A J Bell going down and the liklihood of the government going beyond the current FSCS limits. However, IMO its not good enough. The FCA could mandate 3rd party, independent oversite more often than a monthly or annual audit. I would like to see proof that the assets really exist and verified by 3rd parties frequently. A boat load of reporting specified by the FCA is useless if you (the platform) can produce it all yourself.