The firm, which is in administration, poorly advised people to transfer out of defined benefit (DB) pension schemes, including the British Steel Pension Scheme (BSPS), according to the regulator.

Arthur Cobill, an adviser at IFM, and William Hofstetter, one of its directors, have been banned from advising customers on pension transfers and pension opt outs.

Hofstetter has also been banned from holding any senior management function at a regulated firm.

Cobill and Hofstetter agreed to pay £120,000 and £40,000 respectively to the Financial Services Compensation Scheme (FSCS) to contribute to compensation for IFM’s customers.

The regulator said the firm operated a contingent charging model, which meant it only collected fees if customers transferred out of their DB pension schemes following the firm’s advice. This approach benefitted IFM, Hofstetter and Cobill but risked the long-term financial health and interests of their customers.

Customers transferring out of the BSPS were already in a ‘vulnerable position’ due to the uncertainty surrounding the scheme, the FCA noted.

Out of 307 IFM customers advised to transfer out of their DB pension scheme, 261 completed the process. Cobill advised 245 of those, including 198 members of the BSPS. Hofstetter was responsible for the compliance oversight.

Therese Chambers, joint executive director of enforcement and market oversight, said: ”Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension.

“As experienced advisers, Mr Cobill and Mr Hofstetter, and IFM should have known better than to unravel this. It is only right that Mr Cobill and Mr Hofstetter contribute towards compensating those affected.”

Outflows between Q3 and Q4 last year increased by 6.9% at £13.9bn. Q4 outflows alone increased by 51.1% compared to the same quarter last year, when outflows reached £9.9bn.

In contrast, advised gross sales ticked up by 1.9% between Q3 and Q4 last year to £15.8bn, while they increased by 16.5% compared to Q4 last year’s sales of £13.8bn.

Gross sales for the year stood at £63.4bn, a 2.5% fall compared to last year’s gross sales of £65bn.

On a net basis, however, Q4 sales reached a record low for the third consecutive year at £1.2bn – this marks a 70.1% fall compared to net sales in Q4 2022, and a 35.8% fall from Q3 2023. Net sales for the year reached £10.2bn, marking a 60.7% fall compared to 2022’s net flows of £26bn.

In terms of asset growth, total advised assets in Q4 last year were up 9% compared to the same quarter during the previous year, while assets increased by 5.3% between Q3 and Q4 2023 to £546bn.

See also: Empowering consumers for good outcomes

Rich Mayor, senior analyst at The Lang Cat, said the last quarter of 2023 “rounds off the dominant theme of rising outflows hammering net sales” in the advised platform market.

“Gross sales have been steady throughout, but the wider economic conditions mean more money has been taken out of platforms in 2023 than in any other year, with ISAs and pensions bearing the brunt of it,” he explained.

“The results show that the cost-of-living crisis meant financial plans had to be adjusted for a good portion of clients. The main reasons cited were investors supporting themselves and family members with the increase in household expenses, followed by concerns over capital preservation in volatile markets.

“On the latter point, we’ve also noted a shift in advisers’ retirement income strategies, with an increase in the use of annuities for more risk-averse clients.”

Full findings of The Lang Cat’s report, State of the Advice Nation, is due for publication later this week.

This article was written for our sister title Portfolio Adviser

Auto-enrolment has seen more people saving for their retirement by building up a private pension through their contributions and those of their employer. But an unintended consequence of such a system has resulted in a ‘small pots problem’. The Chancellor Jeremy Hunt thinks he has a solution to that – a ‘pot for life’.

In his Autumn statement last November, Hunt certainly provided a good deal to think about. One thing that struck me about his speech and the accompanying documents was some of the language used when talking about the changes to pensions and Isas.

There was a clear sense of the Consumer Duty in action with references to “good investor outcomes” and “taking a long-term view”. It’s encouraging to see this mindset of the consumer taking centre stage, with more choice and control, but there is a lot to consider, as well as much we don’t yet know.

Empowering consumers for good outcomes is definitely a step in the right direction, but would a pot or pension provider for life solve the engagement issue?

What else needs to be done to achieve the desired outcomes of getting people to make good financial decisions in the short, medium and long term?

See also: Trading tantrums: Should DIY platforms stop treating investors like children?

Will people suddenly be excited about their retirement prospects because they can access the same pension which was set up for them when they embarked on their first job? Will this make them more inclined to save more?

What are the product features and capabilities that will go around this single pot? How much investment will be needed from providers for such a solution?

And how will they offer that service in a way that is economically viable for the provider and delivers good outcomes for the consumer, while avoiding foreseeable harm?

It might be just me, but it feels as though the proposals create more questions than they answer. And I’ve not even raised the key questions around investment options and charges.

Let’s face it, a single pot isn’t a single pot that everyone will be signed up to. You will still need to be able to change single pot providers. How will employees engage with their pot for life? Will they get help growing it?

What happens when that pot for life is no longer right for them? Or if the company they worked at for their first job didn’t carry out the most effective due diligence on providers? What will prompt them to check if there could be a better solution out there? A change of job? A certain point in their career? A major life event?

In a world where many people are struggling financially now how do you motivate them to think about what they might need tomorrow?

Power to the people

In theory, under the new proposals consumers would have the power to ask their employer to pay into a pension product of their choice. This would put the consumer in control, for the first time, of where their workplace contributions are paid. If successful, this could stem the flow of new small pots and could reduce the need for so many pension transfers.

It could have the potential to strengthen the connection between the employees and their pension plans. Being empowered to make their own choice means a pension plan can then travel alongside individuals throughout their career. It belongs to them rather than their employer, which is a common misconception of the current arrangement.

If the appetite for engagement fails to materialise employees will continue in their existing plan which will, eventually according to the proposals, become the default as they change jobs.

In practice, would it all go as the government hopes or could it result in more unintended consequences? There are definitely challenges to consider.

It’s good for us to be talking about the issue and try to remove complexity wherever possible. But in doing so we don’t want to accidentally make things even more complicated.

As the government notes – “the original concept of a workplace pension was based on a model where an individual had a job for life.”

Now people may have several jobs throughout their working lives. Building up multiple pension pots is far from ideal. People may struggle to know what their total pension savings equates to.

But creating a new model is far from easy. Whatever happens, one thing’s for sure – advisers will always be there to help their clients navigate the pensions landscape.

Steve Owen is director of product management at Morningstar Wealth

Following the recently announced pension reforms as part of the Chancellor’s Autumn Statement, Bravura Solutions’ Nicole Kennedy, head of Sonata Alta, and Jonathan Hawkins, principal business consultant, outline some of the best practice ideas the UK pension world could learn by looking down under.

How does the UK pension system compare to that of Australia?

The Australian Superannuation market (Super) has matured significantly over recent decades. In the early 2000s, there was an abundance of schemes, and they were chosen by the employer. Systems, processes, and engagement between providers varied materially and were far from best in class.

In 2023, employees now typically have a choice as to which Super fund their contributions are directed, and where they can take their benefits on retirement as a lump sum or an income stream.

Eligible death and disability insurance premiums can be deducted directly from superannuation accounts, with default insurance coverage often required.

The UK has a rich pensions history but has built a huge range of products and schemes, for most people their workplace pension is their main source of retirement saving. Prior to auto-enrolment (AE) in 2012, workplace pensions were not offered by all employers, with large sectors of society not saving for retirement and relying solely on the State Pension. Since AE, most employers offer defined contribution schemes, and the link between pensions and group insurances has been broken, leading to an insurance coverage gap across the country.

The UK also has two regulators which oversee different parts of pensions savings, creating different rules and regulations and confusion for customers.

Similar to the Australia of the past, we have a multitude of products, systems, charges and communications, and a system where employers choose the pensions arrangement to which they will contribute for their employees. This creates a lack of individual choice, and many different retirement savings pots as people move jobs.

The UK does, however, have allowances and capability for innovative individual or family options for pensions – self-invested personal pensions (SIPPs) and small self-administered schemes (SSASs).

How has Australia managed to achieve high levels of pension saving?

Recent efforts have focused on consolidation of accounts (aka sweeping and stapling) aided by the Australian Taxation Office and regulators. Performance scorecards have also been surfacing underperforming funds to encourage individuals to take action to review their savings and fund of choice.

A significant portion of savings in Australia are held in ‘Profit to Member’ industry super funds, where fees are established to cover costs and profits are returned to members rather than shareholders or corporate entities.

Competition in the industry has increased, with a focus on cost, performance and overall member experience driving better outcomes for savers.

This has also driven the need for more efficient and engaging technology, and a move away from legacy tech that inhibited large-scale automation, access to data and real-time digital experiences.

The UK is lagging in various ways. Innovation, customer service and choice are patchy at best, and it is clear that the regulators and government are now looking closely at this, particularly since the Chancellor’s Autumn Statement in November.

It has also fallen behind in increasing contributions to pensions arrangements as successive governments have failed to further raise mandatory contributions through AE. Worse, in some cases employers are dropping higher-than-minimum contributions to the minimum legal levels.

The recent Mansion House speech and Autumn Statement highlighted that small pot consolidation (or sweeping and stapling) could be coming to the UK. How did this benefit savers in Australia and how could it work in the UK?

Deduplication, streamlining and competition have forced focus on experience, fees and returns in order to retain and grow business. At the end of the day, the saver benefits on all fronts.

Having appropriate technology solutions in place has allowed for transparency and action in a manner that reduces cost to serve and drives trust and engagement with the system.

And, with the introduction of low balance fee rebates in Australia, small pots often became more of a liability for funds than an asset.

The UK should look carefully at what has worked in overseas markets, particularly Australia, and start to legislate for an overhaul of the UK system in a clear and managed way over the next 10 years. This means linked-up systems, better consumer choice, and clear and transparent fees. In the UK, the underperformers need to improve and put the needs of the saver front and centre.

How does automation benefit Australia’s ‘super’ system? How can this be replicated in the UK?

There has been heavy regulation, investment, and a shift of focus to member experience. Strict legislative processing times are enforced for the exchange of data and funding between parties. This is known as ‘SuperStream’.

Outside of transactions captured by SuperStream, there is still variation and legacy processes in some pockets of the industry, creating further opportunity. Funds, however, can see first hand the cost savings and efficiencies achieved from investment in standardisation and automation.

Building on the standardisation of core processes and digitisation of the industry required for Dashboards should be firmly on the UK’s radar. Investment in common processing, a ‘clearing house’ infrastructure, and real-time information to/from HMRC and DWP, will greatly benefit the industry, speed up processing, and reduce errors and fraud. Real-time contribution processing and efficient and scam-proof transfers must be high on the list.

How is the UK pensions space embracing digital transformation?

We are seeing improved access through apps and digital sites, however, there is still a large amount of poor design, inaccessible language, legacy technology, and limited functionality. Some of this is explained through legacy DB schemes aged infrastructure. However, there are many large schemes, administrators, and providers whose core technology is outdated and creaking, and this restricts the ability for real-time transactions and interactions with platform administration software.

It also limits the ability for providers to offer new and innovative products, such as digital advice or educational tools, which are really popular in countries like Australia and greatly help boost understanding and engagement. There is progress being made, but it is fragmented and painfully slow; I’m hoping to see this accelerate following the government’s recently announced reforms.

What do you hope the UK would learn from Australia’s pensions market?

Large-scale digital transformation is not only possible but essential to future-proof and support members, and to ensure providers are still around in 10 years’ time. Providers ultimately need to invest to move the industry forward.

There is a lot to learn – not only where things have gone right, but where things haven’t quite worked out as expected. The Autumn Statement 2023 has heralded a consultation on ’pot for life’ and the government commitment reaffirmed for Pensions Dashboards and Small Pots Default Consolidators. This will require the UK to tackle all the issues highlighted to make a pensions ecosystem fit for the future – this must be done in a coherent way, and include future-looking tech providers as well as existing industry to ensure we build the right future.

According to the FCA register Holborn Assets Ltd has been in liquidation since October 2023.

It has stopped taking on new business but is still required to meet FCA standards when dealing with its customers.

To read more on this topic, visit: UK firm fails relating to SIPPs

The FSCS told International Adviser that it believes there are likely to be a small number of claims from former clients for unsuitable advice in regard to pensions.

Inspirational Financial Management

The firm went into administration in November 2023 but the FSCS told IA that it was taking part in the FCA’s redress scheme for former BSPS members.

Therefore it expects to received a number of BSPS claims.

While the firm is still authorised by the FCA according to the register it is only authorised for specific activities and product types.