FCA to contact 7,700 Steelworkers about their pension transfer advice
In June 2020 the regulator announced that it will be contacting over 7,700 steelworkers who transferred out of the British Steel Pension Scheme (“BSPS”) in 2016 / 2017 advising that a complaint is made, seeking to recover the losses sustained following their pension transfer advice.
Alarmingly, nearly half of the files reviewed by the regulator were deemed unsuitable. The question on most people’s mind is why has this happened?
In 2016 British Steel owner Tata was in trouble and looked to sell the business. This led to the pension scheme being separated from the business due to its large deficit. There were concerns that the pension scheme would fall within the Pension Protection Fund (a statutory fund intended to protect members if their final salary pension fund becomes insolvent), but the government and the Pension Regulator gave permission to create BSPS 2. BSPS2 would be a final salary pension, which offered its members only slightly less benefits than the original scheme. The financial adviser did not always relay this information and often the client did not understand how valuable their pension was.
Members of the original scheme were given a short time to decide what to do, either transfer into the new scheme (BSPS 2) or to transfer out completely. Many members, after receiving their large transfer values and financial advice, transferred out of the scheme completely into a personal pension arrangement. This was despite a final salary pension offering members significant benefits, which cannot be found in a personal pension arrangement. This includes a guaranteed income for the rest of a member’s life and valuable spouse / dependent(s) death benefits.
Alarm bells started to ring with the regulator in 2017, given the huge number of members transferring out of the BSPS. This led the regulator to conduct a market review into the suitability of the pension transfer advice received. Out of the 192 cases reviewed, 91 cases (47%) appeared to be unsuitable. A further 61 cases were missing important information needed to proceed with the transfer and 40 files (21%) were considered to show suitable advice. Members who transferred out of the scheme will now be contacted by the regulator and a number of the firm’s involved have given up their pension transfer permissions.
Clare O’Sullivan a senior associate in RDP’s litigation department has acted for a number of steelworkers, seeking compensation for any losses sustained. Clare states “You may not feel that you have lost anything. It can take years for the losses to become clear. However, time is limited and there are strict time limits when pursuing a complaint. If you have received a letter from the regulator, please take action”. If you would like to discuss the pension advice you received or about making a complaint, please contact Clare for a no-obligation discussion at firstname.lastname@example.org