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Regulators probe British Steel pension mis-selling

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Regulators probe British Steel pension mis-selling
 

Regulators will meet with British Steel workers in Port Talbot on Thursday, as concerns about a potential defined benefit pension transfer advice mis-selling scandal mounts. 

The development follows reports that hundreds of steel workers have received inappropriate financial advice to transfer out of their final salary British Steel Pension Scheme (BSPS) in Port Talbot and Scunthorpe, following Tata's takeover of British Steel last year.

Financial advisers are understood to have descended on the two sites after Tata Steel decided to offload the BSPS into the Pension Protection Fund. Around 130,000 current and former steel workers were given the option to transfer into the lifeboat fund, which provides compensation for defined benefit pension scheme members if there is an insolvency or insufficient assets in the scheme. This potentially means they lose some benefits. The alternative is to move into a new Tata Steel scheme, with potentially higher payouts, or to opt out into a private pension.

BSPS members have until 22 December to decide whether to move onto the New British Steel Pensions Scheme or the Pension Protection Fund. 

Many have secured a cash equivalent transfer value, and the deadline by which to transfer out was recently extended by the scheme trustees to 26 January.

Feeding frenzy

Reports across national media have raised concerns about a 'feeding frenzy' of advisers targeting steel workers as their pension scheme closes.

One firm - Active Wealth UK - has been responsible for a signficiant number of pension transfers out of PSPS. Back in November, it voluntarily agreed with the Financial Conduct Authority to cease new pension business. Earlier this week, the FCA said three 0ther firms had agreed to stop carrying out new pension business in relation to BSPS transfers.

The FCA and The Pensions Regulator (TPR) will meet steel workers in Port Talbot on Thursday afternoon to discuss mis-selling and potential scams. 

A spokesman for TPR said: 'We are attending the meeting in Port Talbot on Thursday as we feel it is important to talk directly to members of the BSPS about their concerns.

'We will be encouraging members to fully engage in the impartial and helpful communications from the BSPS trustees about making a choice about their pension.

'We also want to warn those who may be considering transferring their pension pot to be wary of scams and deals that sound too good to be true.'

A spokeswoman for the FCA also confirmed it would attend the meeting. 

Exit charge

Members of the BSPS who were advised by Active Wealth to transfer out of the BSPS are facing more bad news, after it emerged that they will have to pay a 5% charge if they want to leave the fund they are now invested in.

Several BSPS members were advised by Active Wealth to transfer out of their final salary pension and invest in the 5alpha Conservative fund, managed by Newscape Capital Group. It has an exit charge of 5% for the first year of investment, reducing by 1% for every year the client stays invested, according to the fund’s factsheet.

In one case, a client would have to pay £17,000 to withdraw from the fund in the first year.

The fund aims to preserve capital through market conditions by varying the level of risk through the business cycle. It invests in funds and combines a computer-driven investment process with human experience. Since it was launched in November 2016, it has returned 0.96%.

Active Wealth and Newscape were contacted for comment but did not respond.

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