How safe is my pension?

Linton

https://forums.moneysavingexpert.com/discussion/comment/82137106#Comment_82137106

what more assurance could you get? If you are that paranoid anything could be a scam with the regulator being complicit.

I would have thought that AJBell being a mafia front is one of the less likely possibilities as running a legitimate business is much easier and likely to be more profitable than being able to meet all the external demands such as HMRC reporting, displaying apparently accurate details to users, paying out on demand, dealing with other financial institutions etc if there is no real money behind it. Perhaps Vanguard etc would notice if a mainstream platform was not actually buying any of their funds.

It has been suggested that the directors could be fraudulent. How could they extract large amounts of money without anyone else in the company noticing? Surely the accountants would see that the books dont balance.

But in the end you must accept that nothing is 100% guaranteed. World or national events could occur that lose you all your investments. However under those circumstances your pension is likely to be the least of your worries.

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82137452#Comment_82137452

Fair enough. We all have our own levels of due diligence that we consider necessary. I'm not starting out from a position that anywhere I invest is run by conmen, but at the same time, sitting here, looking at my long service award from a company that many people consider precipitated the 2008 financial crisis (and a mini one of my own)… well, I like to at least understand a bit more about the controls that are in place.

michael1234

https://forums.moneysavingexpert.com/discussion/comment/82137452#Comment_82137452

If you had personally lost money due to fraud by the owners of FCA regulated companies you might be more "paranoid" yourself. As has been said, the fact a company offers a SIPP, doesn't or offers some other investment is not really relevent. They all have client accounts and they all take money from retail.

The large broker you mentioned was not brought into the discussion by me. I was defrauded by much smaller companies than that.

Do you at least agree that putting your money into a small and maybe medium or larger FCA authorised company puts you entirely at the mercy of its owners? i.e. If they are crooks, you lose your money ? If not, tell me why they couldn't do it ?

michael1234

https://forums.moneysavingexpert.com/discussion/comment/82136656#Comment_82136656

Thanks. I think I'd got to that point and realised that many of these companies do that, audit themselves - or at least by a company within the same group of companies that may be controlled be the same people. So surely its value is very little ?

Edit: On top of my previous three losses to director fraud, I woke up one morning and suddenly thought those losses could easily have applied to the more "normal/standard" companies that manage my pension. Happened three times - I must be so paranoid.

So I started looking at what controls are in place to prevent that. I had hoped that someone might say, "….well for example at I dunno Interactive Investor, there is a daily reconciliation and monthly audit which is done by XYZ company. XYZ is chosen by the FCA and works entirely as an agent of the FCA. They don't just look at spreadsheets, they log into several 3rd party systems including (I'm guessing as I'm clearly no expert) Crest, something else and something else. If the director of a company had imagined up some non-existant stocks, they would stick out like a sore thumb….."

Linton

https://forums.moneysavingexpert.com/discussion/comment/82137535#Comment_82137535

There are a number of places where fraud or mis-management could potentially occur. At the lowest level there are the underlying investments that you actually own - mainly shares in companies or bonds of some form. Here protection is provided by a very high level of diversification. Assume any individual underlying investment could, with varying degrees of probability, fail.

The next level is the fund manager. Them being a publicly listed limited company is helpful in that the directors are generally not the owners. The number of people that would need to be involved would make a large scale fraud extremely unlikely. Furthermore if a small scale fraud that directly affected your money did occur the onus would be on the fund manager to provide redress. A large fund manager would have the resources to do that.

I would be wary about any isolated fund run by an individual star manager.

Next is the platform. Again them being a large public listed limited company is strong protection as is a long track record, a good reputation and a large number of users. Again, criminality with any platform of any size would require a large number of people to be involved. They gain more from being successfully profitable than for it to be worth the risks of dodgy behaviour. Finally misbehaviour by any employee should be covered by the company.

Finally we have the advisors. Here there are many levels of protection provided you use regulated IFAs. They are not allowed to hold client money, they merely transfer it elsewhere, either to you or to a fund manager with your knowledge. Their activities are increasingly constrained by regulation and they are checked for compliance. Finally their activities must be convered by professional indemnity insurance.

In any case you should have direct immediate access to a platform showing you where your money is actually invested. A back street rogue IFA could hardly fake it.

You may have noticed that I have not referred to the FCA protection. This is deliberate. Most protection comes from the investor behaving prudently and having the knowledge/understanding to do so.

Perhaps it would help if you told us about your bad experience.

michael1234

Thanks for the overview of risks. Its the platform I'm focusing on.

You mention there should be a platform where I can see how my money is invested. Of course there is. The question is how do I know the information there is not made up? You say "a large number of people" would need to be involved. Some companies don't have a large number of people and even if they did, their systems might be such that only a tiny number have access to the all important external systems which would verify what is actually owned.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82137642#Comment_82137642

The OP had a bad experience ( like many) in investing in P2P companies mainly involved in property development.

Often they offered easy returns in double figures- so as we know that usually comes with a high risk.

The sector largely imploded due to poor management, high debt levels and overvalued collateral.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82137761#Comment_82137761

OP is adamant that it wasn't just generic P2P risk:

These barstewards didn’t just go belly up, they were involved in various levels of fraud. For me that was Lendy, FundingSecure and Colateral.

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.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82137685#Comment_82137685

There are far too many complications…

ETFs are bought and sold in realtime. How would a simulation know the right prices without actually buying and selling the funds in the right quantities to real counter-parties at the real time?

Real funds pay out real dividends which the platform may send on to the customer's bank account. People can sell their holdings and withdraw their money at any time .So the platform would have to hold a large reserve of real money.

Things can happen to real funds like mergers or a suspension of dealing. This of cause would have to be detected presumably by a team of people who follow the detailed financial news from across the world and can implement the required changes immediately.

Then you have split responsibilities. Someone who ran the fake system would have to be a tech whizz with cover from other people in on the scam. But the tech whizz would almost certainly not be the person who authorises payout of large amounts of cash.

If someone really could make it work over the long term perhaps one could ask why have the real investments at all. But it's much easier to use the real world rather than invent and run an indistinguishable fake one. That is sounding like the plot of a John Grisham novel or perhaps a sequal to The Matrix.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82137761#Comment_82137761

Sad for those concerned but investing in this way runs counter to the sort of prudent behaviour I was advocating. Perhaps I should add "understand what risks you are taking" to the bit on diversification.

In any case the whole environment had very little commonality with modern fund investing through a recognised platform.