Members of the British steel pensions scheme members have been “shamelessly” exploited by “dubious financial advisers” as per a report by MPs. They warn of “another major mis-selling scandal”. Tata Steel, in August 2017, sponsored the £15bn scheme, striking a deal to restructure it. However, a crisis in 2016 prompted the country's largest steel producer in 2016 to put its entire UK operations up for sale. Employees of the company voted to accept proposals to close the existing pension scheme to new contributions. They were given option of moving to, either the Pension Protection Fund (PPF) or a new final salary scheme BSPS2. Both offers were comparatively meager. Those who were not at an pensionable age, had the option of switching to a defined contribution scheme called DB transfer.
A report by the Work and Pensions Select Committee criticised the Pensions Regulator and Financial Conduct Authority, accusing “all those bodies with a duty to watch and act” of failing to ensure “members were not left in the dark”. The report said “faced with making a life-changing choice in a hurry”, many were attracted to a third option, which meant giving up generous and stable benefits in lieu of a riskier investment. The circumstances surrounding the restructuring of the scheme, it said, created the “perfect conditions for vultures to take advantage”.
“Many BSPS members were shamelessly bamboozled by advisers into signing up to ongoing adviser fees and unsuitable funds, characterised by high investment risk, high management charges, and punitive exit fees. Another major mis-selling scandal is already erupting and we therefore call on the relevant bodies to treat this as such and take urgent action,” the report said. Labour MP Frank Field, chairman of the committee said, “Once again we find the Pensions Regulator fiddling while Rome burns, when it should have seen this rip-off coming. All the responsible authorities must act, now, to stop more people being cheated.”
The scheme, since March 2017, has processed 2600 pension transfers equating to a total value of £1.1bn. The average value of BSPS pension benefits transferred out was £400,000. Transfer value exceeded £1m in around 20 cases. The committee has recommended the Pensions Regulator to conduct a review to learn lessons and the FCA to create an online register of advisers and their current status. “Reviewed communications sent to members and were satisfied they adequately warned of the dangers of transferring out of a DB scheme,” a spokesman for the Pensions Regulator said. “And while TPR does not regulate financial advice, we wrote jointly with the FCA and TPAS members to flag potential risks.”
