Published: Thu, February 15, 2018
Business | By Tara Barton

British Steel pensions targeted by 'vulture' advisers

British Steel pensions targeted by 'vulture' advisers

Tata announced a restructuring of the £14bn fund in 2017 to bolster its ailing British operations afloat.

Tom McPhail, Hargreaves Lansdown's head of policy, said: "It is extraordinary that even after the pension mis-selling scandal of the 1990s, the members of the British Steel scheme could be let down so badly".

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.

The report said the Pensions Regulator (TPR) had been alerted to "gaps in basic data" in the communications to members.

In the report released this week, the committee blasts The Pensions Regulator and the FCA for their handling of the "major misselling scandal" relating to the British Steel Pensions Scheme. "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". A deal was done to allow the pension scheme - one of the UK's largest - to transfer to the Pension Protection Fund, a government-backed pensions lifeboat.

Both were less generous than the scheme that closed but BSPS2 was better for the majority of people than the PPF.

Those who had not reached pension age had a third option of switching to a defined contribution scheme, known as a DB transfer.

But circumstances surrounding the BSPS "created ideal conditions for vultures to take advantage", the MPs concluded. We have been carrying out considerable work within our remit on DB pension transfer advice.

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

On average, the amount transferred out was £400,000, but 20 different transfers saw more than £1 million moved.

The committee noted that an outline plan to save Tata Steel UK, the "sponsor" of the BSPS, had been in place since May 2017.

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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".

He added: "All the responsible authorities must act, now, to stop more people being cheated".

"The BSPS and the employer failed to make sure that all workers had access to high-quality impartial advice about their pensions and failed to make sure they had enough time to make calm, well-informed choices about whether or not to transfer", he said.

"It was the responsibility of TPR, who oversees trustees and signed off the RAA, to monitor the situation and ensure that members were not left in the dark", the report continued.

The report claims contingent charging is "a key driver of poor advice", adding: "Genuine independence is not compatible with a charging model that only rewards advisers for recommending a particular course of action". The government should ban contingent charging for all DB transfer advice. "We are also reviewing the rules that apply to firms advising on pension transfers, and will consider this report as part of this".

"We note the committee's recommendations and are continuing to work more closely with the Financial Conduct Authority (FCA) to protect pension savers". We are now looking at the Register to see how we can make it easier to use.

"The FCA remains focused on ensuring consumers are protected".

"We believe this was the best possible outcome for everyone involved in what was a very challenging situation".

It also called on the FCA to ban charging on DB transfer advice, as well as name and shame firms or individuals suspended from providing transfer advice, and abandon plans to remove the requirement for advisers to start from the position that transferring out is not in the interests of most DB scheme members. The scheme's trustee refuted the conclusion, saying it was "not supported by the evidence".

Politicians on the committee told the watchdogs to ensure that members of the scheme are made aware of their options.

"Regulators need to toughen up when it comes to shutting down irresponsible financial advisers, and warning people about which firms to avoid". "We will be asking all those involved to report back to us on the changes they will make, promptly, to stop this happening again".

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