Pensions: Investors still not aware of commission they are paying

19th July 2011

Consumer Focus claims pension companies are offering incentives to financial advisers – who sell personal pensions – which end up costing investors more.

In a report published today Consumer Focus has called for the Financial Services Authority to take urgent action.

The report says that despite a planned FSA ban on big commission payments, pension companies will continue to pay ‘trail' commission on contracts taken out before the ban comes into force at the start of 2013 as part of the FSA's retail distribution review.

32 thoughts on “Pensions: Investors still not aware of commission they are paying”

  1. JW says:

    Hi Shaun, did you see the comments of Rietze the CEO of Linde on Reuters over the weekend? Looks like the German’s are finally drawing a line in the sand and are openly talking about exiting. Also interesting piece by UBS on a topic close to your heart about how safe are Central Banks, thinks the ECB is ‘different’ because of the delay/possible refusal politically for all the national CBs to support possible recapitalisation.
    It will take a lot longer than the Italian cruise ship, but she’s going down.

    1. Anonymous says:

      Hi JW

      Ironically UBS were an employer of mine maybe some of the thoughts remained….

      More seriously there are plenty of questions as to how the ECB link to the 17 national central banks and 17 national treasuries would work in a crisis.

      If I may reply to 2 comments with one answer I have been calling Portugal Greece-lite for a while as it heads in the same sad direction.

  2. Anonymous says:

    Excellent article, Shaun and the fact that S&P are now singing your song on EZ austerity is welcome if belated. Concerning the medium term view of the EZ in view of your comments on the EFSF I am rather reminded of the RAF motto – except that I see “ardua” stretching from horizon to horizon with nary a sight of any “astra”. 

  3. Drf says:

    “The whole euro zone rescue concept (EFSF) is unravelling before our eyes”  Well, what a surprise.  Could we in all reality have expected any other outcome, particularly after the political bungling with which the crisis has been handled since its emergence?

    A common currency without at least some accompanying stalwart powers to control individual state economies was clearly destined to fail from the outset, but of course they hoped politically, at the Euro’s genesis that gradually more political and sovereign power could be imposed on the people without democracy, so as to enforce common economic parameters and taxation!  It is that failure (fortunately) which has led to the current position.

    There is significant evidence to show that most of the ordinary people in the EU do not want to give up their democracy and their individual cultures and states, so for now the fascist politicians intent on such domination seem to be losing, but do not be fooled; they have not given up yet! Think about what their next move could be to enforce their dream?

    1. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically until the current recession not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

      1. Rods says:

        Apologies for posting this several times, but I just got a system error from Discus and the form did not change into the comment as if it had accepted it, so I retried several times!!!

    2. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically until the current recession not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

    3. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically until the current recession not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

    4. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically, until the current recession, had not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

    5. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically, until the current recession, not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

        1. Rods says:

          Thank for the information. You learn something new everyday, and I’m happy to be corrected.

    6. Rods says:

      I think there are also 2 other factors:

      At the time the southern European economies were accepted for the Eurozone, it was widely predicted that the current situation would be the outcome, especially for Greece, by many economists. The economists were just derided as anti-EU (and if English called ‘Little Englanders’) and of course all these warnings were ignored by the EU commission where ‘the project’ has always taken priority over reality.

      I think the second even more fatal thing, which made this situation inevitable was Germany and France breaking the the original “Stability pact” of a maximum debt of less than 60% of GDP and a maximum budget deficit of 3%. When France and Germany basically told the EU fine us if you dare, the pact was broken and the Green light firmly lit for all countries to behave the same. I have read that the only country that had ironically, until the current recession, not broken the terms of the pact is Spain.

      A new stability pact is not going to solve this sovereign debt crisis and I think a crucial lesson is, if you don’t control debts and deficits before the market start selling / abandoning a countries bonds due to the risk of a default and therefore forcing up interest rates, it is too late! At this point large austerity measures to try to re-balance the public / private GDP ratio are too late as this needs to be done fairly slowly as it takes along time. If the country tries to do this too fast you end up in a Greek style economic death spiral. And of course this is all much more difficult (or impossible?) when you are in a recession / depression and you don’t control interest rates or the money supply!

      And Merkosy, shouted, more coal, more coal… so the train goes faster and faster, the end of the line buffers are getting steadily closer.

  4. Alex Eames says:

    Further irony Shaun was that the Costa Concordia cruise ship listed so quickly that the lifeboats couldn’t be adequately launched. That’s a frighteningly accurate picture of the EFSF situation isn’t it? (Even down to the Italian captain at the ECB).

    As to what’s happened to Madame Lagarde. She has become the personification of the misinterpreted Peter principle. The principle is supposed to be where people are promoted to a level at which they are no longer competent to do the job – thus reaching a career ceiling. What it has become in the banking/economy sector is that incompetent people are now promoted “away” to get rid of them or given huge bonuses as a reward for extreme failure. Of course, she’s ex vampire squid too – just like most of the newly appointed elite positions in Europe.

    1. Anonymous says:

      Hi Alex

      At least the lifeboats didnt capsize and sink….

  5. Andy Zarse says:

    Talking of Madam Lagarde, and re our discussion on friday, I just heard on the radio a track from the Lexicon of Love called The Look of Love. The opening lines could almost have been written for The Silver Witch:
     
    When your world is full of strange arrangementsAnd gravity won’t pull
    you throughYou know you’re missing out on somethingWell that
    something depends on you
     
     

  6. Robert says:

    Shaun hi, and fascinating as usual. With a largely European family, I spent New year being constantly badgered as to how the UK is out of touch with Europe/Cameron doesn’t know what he’s doing etc, and explaining that as a generally pro EU person, I expected the EZ to ‘muddle through’ 2012, possibly losing a member (ie Greece) or 2, but with Germany probably agreeing to some form of diluted Eurobonds and some form of diluted fiscal policy being shared.

    I know you avoid (quite correctly) political comments, but I have to say that I am becoming increasingly of the opinion that it is impossible to see how the EZ can be held together in (more or less) its current form in 2012. I am very much aware through work and family that the views in mainland Europe frequently differ form here, but I cannot see Germany/Holland agreeing to basically underwrite the rest of Europe, and i can’t see the markets waiting until the current leaders get anywhere close to even discussing the underlying problems of this crisis rather than trying to prevent the next one.

    Would you agree therefore, that by December 31st 2012, it is looking increasingly likely that the EZ will look nothing like what it does at present, – either 2/3 Eurozones, 4/5 countries missing, and the increasing probability of a disorderly breakup during the year. Maybe 70:43 now, rather than 20:80 as (personally) I felt even 3 months ago.

    Am I being overly dramatic, or do you think the EZ will continue to ‘muddle through’ somehow, and ‘something will happen’.

    Regards and thanks

    Robert

    1. Anonymous says:

      Hi Robert

      I think you mean 70:30! But dont worry.

      I always thought the Euro was flawed but am not an enemy of it and am certainly not an enemy of Europe. Accordingly I suggested “The Three Euros” recently as a route forwards for those who wanted to keep the principles as much as possible in a form that had a decent chance of survival.

      Even the rating agencies are sometimes right and the economic competitiveness problem will haunt the current Euro until it breaks. Sadly I see those in charge as determined to keep going regardless of the costs and although it is a horrible phrase “collateral damage” seems a risk as it breaks down.

      As to timing we will find out much from what happens in Greece between now and its next big bond redemption on March 20th. But also there is the economic deterioration on the Iberian peninsula which does not seem to have hint the mainstream media yet.

      1. Robert says:

        Shaun hi

        So, in a nutshell, one can write numerous different scenarios for the EZ over the next 12 months (2 EZ’s, 3 EZ’s, 17 different currencies etc), but there is now an above average chance (which is probably increasing), that there will be a disorderly breakup with substantial implications on both the EZ and none EZ countries.

        Robert

  7. Anonymous says:

    Shaun slightly off topic but I have a concern. I read that Olli Rehn and his cohorts have thrown the Belgian budget out as “being too optimistic” forecasting a budget deficit of 2.8% of GDP. Rightly, he has been attacked by the Belgian Enterprise Minister. Can someone please tell me a)what the criteria are for evaluating proposals, b) were these ever published, and c) who id anyone was consulted? I feel the whole EZ experiment is suffering from “mission creep”. Thanks

    1. Anonymous says:

      Hi Ray

      Actually there was a fiscal deficit procedure in the Stability and Growth pact of the 1990s which isn’t that different to what is proposed now, but in reality everyone simply ignored it.

      The new drive arrived mostly at the October 21st meeting if I recall correctly and since we have had talk of ” balanced budgets” which has since been reined (sorry!) back from. As to your questions I do not think a or b exist but I can answer c) Angela Merkel and Nicholas Sarkozy and their various aides.

    2. Anonymous says:

      Ray,

      Rules seem to count for very little – remember the no bailout rule within the Lisbon treaty.

      A few years ago Lithuania tried to join the EZ,  Lithuanian inflation within bounds of Eurozone inflation, but was 0.1% over the allowed deviation of European Union inflation. In short some faceless EC bureaucrat dishonestly used inappropriate statistics to deny Lithuania eurozone membership.

      The EC applies rules selectively. The EC is disfunctional and not fit for purpose. They have been trying to fix the Greek problem for nearly 2 years and have only succeeded in digging a deeper hole.

      1. Anonymous says:

        Expat – thanks for your comment. It’s the selectivity that hacks me off; there is no level playing field and the unelected bureaucrats can have a field day working off their frustrations on any they happen to chance upon. I fully agree with you on the EC and as far as Greece is concerned I believe in all honesty that the short-term pain of an exit could be worth the longer-term gains in growth. Thank you. 

  8. JW says:

    Hi Shaun, It looks like Portugal is going the same way as Greece, the spreads are going through the roof today with no ECB intervention. Next Ireland?

    1. Apparently Lisbon’s credit worthlessness was {again} downgraded, bringing them to junk status and thus forcing some institutions to unload them. The Troika Kommissars will be in Lisbon by week’s end negotiating another bailout, right after they try and strong arm the Greeks into a deal they can’t mathematically hold up.

      1. Anonymous says:

        Hi Mr.K

        I did reply but it has come up in the wrong place( gremlins etc.). So apologies but if you look at the comments on the site you will see my reply.

  9. It is also the case that absolute-return investors may be tempted to “front run” coming bond auctions if they think the ECB policy is working. On this point, market talk is focusing on an even bigger amount to be borrowed at the next 3-year longer-term refinancing operation (LTRO) due on 29 February. GREED & fear has heard guesstimates of up to €1 trillion ! 
    http://www.zerohedge.com/news/shocking-%E2%82%AC1-trillion-ltro-deck-clsa-explains-why-massive-quanto-easing-ecb-may-be-coming-next-m 

  10. Draghi would’nt dare do a trillion euro LTRO.. or would he Shaun ? Besides, what effect has this really had ? From what I hear, most of the money from the last one simply got parked back at the ECB.. 

  11. Anonymous says:

    Hi Mr.K

    The whole Iberian peninsula looks in trouble to me and whilst today’s move in Portuguese bonds was extreme ( 7 whole points for the ten-year) overall it is still Spain which seems in the “wrong place” bond price wise.

    Markets do not seem to have cottoned on to the fact that Spain is certainly in a recession and may be nearing a depression as I wrote a week or so ago. We have from time to time got these “eye of the storm” experiences and somehow it must be related to human psychology and our unwillingness as a group to accept unpalatable truths.

  12. Davidmichael Lilley says:

    The big focus has to be on Mr. Greece. He hasn’t got a job, he owes the equivalent of two years wages and has a big debt repayment due in March. He needs to get his lenders to take a 50% hit to get his next bailout which is guaranteed not to be repaid.

    We must hope that the lenders don’t write off their loans, he defaults, they get an insurance payout and the EFSF and the troica doesn’t have to loose a further 130b Euro.I am only familiar with a stability fund of 440b euro, half already being commited and Germany being responsible for 211b of it and not 29%. But wherther it is 440 or 780 it is based on pledges and not cash. When their growth falls they will argue that their pledge should also fall. When their borrowing costs rise as a result of a ratings downgrade they will be even less likely to support Mr. Greece when many of them are poorer than Greece.We must hope that the 20th March triggers the exit of Greece from the EZ. Anyone with a position in Greece has had two years to exit that position. It will be a lesser hit than the loss of the ERM.The other PIIGS would take note. There is no money in the EFSF, the IMF dosen’t have the necessary funds, China will not buy toxic debt, you were poor before you got a credit card. Its not austerity, its back to normal plus deleveraging.

  13. Davidmichael Lilley says:

    The big focus has to be on Mr. Greece. He hasn’t got a job, he owes the equivalent of two years wages and has a big debt repayment due in March. He needs to get his lenders to take a 50% hit to get his next bailout which is guaranteed not to be repaid.

    We must hope that the lenders don’t write off their loans, he defaults, they get an insurance payout and the EFSF and the troica doesn’t have to loose a further 130b Euro.I am only familiar with a stability fund of 440b euro, half already being commited and Germany being responsible for 211b of it and not 29%. But wherther it is 440 or 780 it is based on pledges and not cash. When their growth falls they will argue that their pledge should also fall. When their borrowing costs rise as a result of a ratings downgrade they will be even less likely to support Mr. Greece when many of them are poorer than Greece.We must hope that the 20th March triggers the exit of Greece from the EZ. Anyone with a position in Greece has had two years to exit that position. It will be a lesser hit than the loss of the ERM.The other PIIGS would take note. There is no money in the EFSF, the IMF dosen’t have the necessary funds, China will not buy toxic debt, you were poor before you got a credit card. Its not austerity, its back to normal plus deleveraging.

  14. Mac says:

    I have a question, if the Eurozone or even the EU breaks up what
    happens to the debt pile currently being multiplied by Eurocrats?  What happens to it if there emerged say a 2
    tier EU?  The ECB must be radioactive now
    not just toxic, what happens to that little lot if a split or cessation
    occurs? 

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