British Steel pension members 'bamboozled by parasite advisers', say MPs
Select committee says workers let down by regulator, govt, trustees
Tata Steel Ltd
1,915.00p
16:30 18/04/24
Former British Steel workers were "bamboozled" into shifting their pensions into investments with punitive fees by "dubious" and "parasitical" financial advisers, a parliamentary committee said on Thursday.
In a scathing report, the all-party committee said British Steel Pension Scheme (BSPS) members had moved their cash into "unsuitable funds characterised by high investment risk, high management charges and punitive exit fees".
The committee found that from March 2017 until now, the scheme had processed 2,600 pension transfers equating to a total value of £1.1bn, according to its trustees. The average value of BSPS pension benefits transferred out was £400,000.
In around 20 cases the transfer value exceeded £1m. During its investigation, the committee was told of advice fees typically around 2% of the transfer value - and that the receiving funds sometimes imposed high annual charges and exit penalties ranging from 5% to as high as 10%.
British Steel was taken over in 2007 by the India's Tata Steel. As part of a deal to keep plants open, the pension scheme was transferred to the Pension Protection Fund.
Committee chair Frank Field condemned the regulators, the government, and the company for creating "perfect conditions for vultures to take advantage", and called on the Financial Conduct Authority to ban high percentage pension transfer fees.
“Once again we find the Pensions Regulator fiddling while Rome burns, when it should have seen this rip-off coming,” he said.
"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. It is bad enough failing properly to enforce the rules there are, but when the rules are this weak…?"
"To propose, as the FCA did in July last year, abandoning the advisor presumption against transferring out of a gold-plated, stable, indexed pension scheme: it really makes you wonder whose side they're on. Given a choice between two defined benefit options worse that what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option."
Field said he expected to see more cases like this.
"Scheme sponsors, trustees, regulators and government—all culpable in this case—must ensure that the same mistakes are not made again," he said.