On this day, 5 November, in 1991, Robert Maxwell, owner of the Mirror Group, died at sea.
The then Prime Minister, John Major, paid tribute by calling him a 'great character'. He must have regretted these words when it later came to light that, not only did the group have massive debts, but Maxwell had plundered £440m from the company's pension funds.
The vast majority of this money was either refunded by Mirror Group or paid out by the government, although those with responsibility for safeguarding employees' pension savings received little more than slapped wrists and the money was never recovered.
The Maxwell pension scandal:
- Affected 30,000 people
- To the amount of about £400m
But this is far from the only pension scandal...
Broken government promise
As I wrote in A pension scandal worse than Maxwell, the Government's promise to workers that their pensions were 100% safe was not the case for 140,000 people whose employers, and pension schemes, collapsed between 1997 to 2005. Eventually, after immense pressure, they did agree to keep 90% of their promise. Better than nothing, but not much comfort for those who suffered or died beforehand.
The broken promise scandal:
- Affected 140,000 people
- To the amount of about £900 million!
Equitable Life
Insurer and pension provider Equitable Life had a load of holes in its pension schemes and the regulator made a whole load of failures in its duties to spot them and, when it did spot them, it did a whole load of nothing. The government then did nothing too, and it continues to do nothing to help (outside of a few noises about helping the worst off some time in the distant future, if they're still alive of course) despite Parliament's own Ombudsman slamming the regulatory failures.
The Equitable Life scandal:
- Affected around one million people
- To the amount of £1bn+
Personal pensions
Occupational pension schemes (e.g. final-salary schemes) had become increasingly unaffordable. There is no doubt that something had to be done about them (and still has to be done about many of the few that remain). However, that 'something' turned out not to be an honest admission to workers by government and business, but instead a huge kick in the teeth by encouraging people to leave their guaranteed pensions for the risks of the stock market. For many this was a bad move and it resulted in the largest pensions mis-selling scandal to date, not to mention falsely-raised expectations and unnecessarily broken dreams.
The personal pensions scandal:
- Affected more than two million people
- To the amount of £10bn
Stealth tax
A mere footnote in a very long Treasury document removed a tax advantage to pensions that, 12 years later, we realise cost us collectively a staggering sum. The removal of tax credits on share dividends may not sound particularly harmful to you, but it has resulted in the greatest pension scandal of all by a factor of ten or more.
Let me put this scandal into perspective. You'll have been reading for many years about the massive pension deficits that large companies have. Well, the Government's tax raid was much, much bigger than that - and it's ongoing.
The stealth tax scandal
Affected twenty million
To the amount of £100bn-£150bn
What can we do?
We can't rely on anyone to protect us from scandals or to save us from them afterwards. We must rely on ourselves:
- Don't count on the state pension. Make your own retirement provisions, and consider investing part of your retirement fund in alternatives to pensions, such as shares ISAs.
- Seek a second opinion (and third and fourth...) on your retirement plans through our Q and A tool.
- Read all the small print in your pensions documents. Understand it.
- Keep written records and ask for everything in writing. If you're being sold a pension with advice, ask for a letter explaining why it is suitable for you. This should put 'advisers' off mis-selling to you.
- Think you're a victim of mis-selling? Complain. If that fails, contact both the Financial Ombudsman Service and the Financial Services Authority.
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