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Regulators probe British Steel pension mis-selling

The Financial Conduct Authority and The Pensions Regulator will meet with British Steel workers to investigate pension transfers.

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.

6 comments so far. Why not have your say?

Michael Loveridge

Dec 13, 2017 at 17:10

Considering the thousands of pages of regulation that exist to make the everyday management of financial services so difficult why is there a bloody great loophole that allows a person's biggest asset to be plundered by commission hungry sharks?

Virtually none of these steelworkers would know anything at all about investment, and would be completely incapable of judging whether to transfer their pension funds or not. Yet the government allows them to be "advised" by people who have a massive vested interest in persuading them to make a transfer.

Independent? Don't make me laugh! These unfortunate people are liable to be financially screwed to the tune of tens of thousands of pounds just to line the pockets of seedy salesmen.

I just hope these firms are carrying a hell of a lot of professional indemnity cover, as I suspect they'll be needing it.

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Dave Knight

Dec 13, 2017 at 17:28

@ Michael Loveridge.

"Yet the government allows them to be "advised" by people who have a massive vested interest in persuading them to make a transfer. "

I think you'll find that the regulations dictate that these people are obliged to take financial advice in this instance.

Who they go to is another matter, but don't blame all advisers for responding to a genuine need for advice.

And not everyone wants to be stuck in the PPF for want of doing something decisive.

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Michael Loveridge

Dec 13, 2017 at 17:50

@ Dave Knight

I have no objection at all to the principle of their having to obtain financial advice. But that advice should not under any circumstances be given by people who have a financial interest in the outcome of the advice.

How can such advice possibly be considered as `independent'?

There needs to be a panel of industry professionals who are paid by the industry to provide free advice where it's needed, but they should be full time, genuinely independent advisers who have no links or incentives to refer business to any particular company.

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Dec 13, 2017 at 18:15

IFA's giving bad advice, had this many times, so no surprise here.

But what I don’t understand is how Tata is getting away with this rip-off.

They held a gun to the heads of the unions – ‘either you accept these pension changes or else.. ‘ Those still working for Tata could weigh up the loss against the benefits when they voted. But hundreds of previous employees were by then working elsewhere and hence would have no benefit by agreeing to the pension alteration. They have been forced to accept the current situation. This is not equitable

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Dave Knight

Dec 13, 2017 at 19:49

@ Michael Loveridge

By all means try and set up such a scheme. Got to be easy hasn't it?

@ RippedOff

Sensible points missed by most. Give a few thousand workers a few choices, and no time to deal with the legally required niceties, then just leave them to figure out the least worst option.

It's the employers who have shafted the workers, not the honest advisers trying to help them through a minefield against the clock.

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Dec 15, 2017 at 17:09

And where are the UNIONs in all this ? Making sure that the workers were guided towards 'sensible' advice' ?

No - too busy counting their index-linked pension pots !.

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