‘Major mis-selling scandal’ under way as financial advisers ‘bamboozle’ ex-British Steel staff
Former British Steel workers have been “shamelessly bamboozled” by financial advisers into transferring their pensions and badly let down by regulators that should have better protected them, according to an influential parliamentary committee.
In a highly critical report, the House of Commons work and pensions committee has concluded that the ex-steel workers have been “let down by all concerned” and that “another major mis-selling scandal” is under way.
The committee said steel workers were not adequately protected from commission-hungry advisers who stood to profit from moving their retirement funds into alternative get-rich-quick schemes.
The committee has called on the Financial Conduct Authority to urgently ban high percentage fees on pension transfers, which it said encouraged unscrupulous financial advisers to target vulnerable workers.
Committee chair Frank Field condemned the regulators.
“Once again we find the Pensions Regulator fiddling while Rome burns, when it should have seen this rip-off coming,” he said.
The privatised British Steel was merged with the Dutch firm Corus, which in turn was taken over in 2007 by the Indian steel operator Tata Steel. 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.
Financial advisers targeted the workers and encouraged them to opt out of this scheme, even though in many cases it was not in the worker’s best interests.
Since March 2017, the scheme has processed 2,600 pension transfers equating to a total value of £1.1bn, according to the trustees. In about 20 cases the transfer value exceeded £1m. The average was £400,000. The committee heard of advice fees typically around 2% of the transfer value.
Field: 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. To propose, as the FCA did in July last year, abandoning the adviser presumption against transferring out of a gold-plated, stable, indexed pension scheme: it really makes you wonder whose side they’re on.
“We will be asking all those involved to report back to us on the changes they will make – promptly – to stop this happening again,” he said.
Tom McPhail, head of policy at Hargreaves Lansdown said it was extraordinary that after the pension mis-selling scandal of the 1990s, the members of the British Steel scheme could be let down so badly.
“The scheme trustees and administrators should surely have taken more responsibility for protecting members interests and shielding them from unscrupulous advisers.”
The Pensions Regulator said it had actively helped tackle unscrupulous financial advisers who were exploiting the situation and that it would work more closely with the FCA to protect pension savers.
The FCA said it is reviewing the rules that apply to firms advising on pension transfers and “remains focused on ensuring consumers are protected”.