British Steel: Regulators 'failed to protect' members from poor advice

British Steel pensioners left

Concerns began to swiftly mount late a year ago, over the advice given to members by pension advisory firms on whether to remain with the existing scheme (which will enter the Pension Protection Fund, the government scheme that covers members of pension scheme that falls into insolvency), or transfer to a new defined contribution scheme being set up by Tata Steel or transfer into a third party scheme.

Many retirees were "shamelessly bamboozled" into transferring hundreds of thousands of pounds into risky products, netting advisers chunky payouts, the Work and Pensions Select Committee said.

Figures released by the scheme's trustees on 8 February show that since March 2017, 2,600 pension transfers have been processed by the scheme, for an eye-watering value of £1.1 billion.

The report revealed the average value of BSPS pension benefits transferred out was £400,000 although, in around 20 cases, the transfer value exceeded £1m.

It says the FCA must improve its online register of advisers and argues it would be "reckless" to drop the requirement for advisers to start from the presumption that a DB transfer is a bad idea.

-Is your final salary pension at risk?

The report recommended that TPR conduct a full review of its role in the BSPS restructure, "listening to members and learning the lessons of how they were let down".

Field says: "I struggle to fathom how things like contingent fees are, or have ever been, considered an acceptable basis for providing "impartial" advice on a decision like this".

Active Wealth, an advice firm that was accused of giving poor advice to steelworkers and has since entered liquidation, admitted 90% of its BSPS clients paid using contingent charging in a letter to Work and Pensions committee chair Frank Field.

"This is the first deal like this, but there will be more".

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He continued: "All the responsible authorities must act, now, to stop more people being cheated". "We will be asking all those involved to report back to us on the changes they will make, promptly, to stop this happening again". We are now looking at the Register to see how we can make it easier to use.

The Pensions Regulator should also conduct a review into the way 2,600 pension transfers totalling £1.1bn were conducted, MPs demanded.

A TPR spokesman says: "We worked closely with the British Steel Pension Scheme trustee following the complex restructuring of the pension scheme which we approved in August previous year". "Our activities included taking part in a panel discussion event in Port Talbot last December, writing to all members of the scheme, and publicising the issues in the local press and on social media".

Unsuitable advice on DB transfers is not only confined to BSPS members, the report warned. And, while TPR does not regulate financial advice, we wrote jointly with the FCA and TPAS to members to flag potential risks.

Of the FCA, Field says he "can't see much evidence of it working better for the people it is meant to protect" since it rebranded from the FSA.

-Pension dilemma: £659,000 today, or £22,000 a year for life?

The committee warned that this practice could be being carried out across the country as the pension freedoms introduced by George Osborne in...

Former pensions minister now Royal London director of policy Steve Webb said although the scheme and the employer failed to make sure all members had access to "high-quality advice", many steelworkers took good advice and chose either to transfer or not on the basis of that advice.

The committee has put together a 39-page report, detailing and summarising the various pieces of information and evidence it has collected on the British Steel saga over the past couple of months. Politicians on the committee told the watchdogs to ensure that members of the scheme are made aware of their options.

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