Yahoo Finance British Steel pension scheme members ‘preyed on’ by financial firms
Firms dubbed “sharks” and “vultures” are preying on steelworkers to persuade them to transfer their pensions so advisers can pocket huge fees, MPs heard this week. They forced the main City regulator to name and shame three firms they said were “ripping people off”.
It emerged that some of the financial firms touting for business are using the lure of a free hot meal – typically sausage or chicken and chips – to try to get people in front of a salesperson. The advisers pocket fees typically of about £6,000 per case.
Meanwhile, fears are growing that thousands of retired members of the £15bn British Steel pension scheme, some more than 100 years old, who are having to make complex decisions about their pension, could end up losing out financially.
British Steel was privatised in the 1980s and later merged with a Dutch company to form Corus, which was taken over in 2007 by the Indian steel operator Tata Steel. However, Tata’s UK arm is no longer able to support the pension scheme – one of the UK’s largest – without becoming insolvent, so in the new year it is transferring over to the Pension Protection Fund (PPF), a government-backed pensions lifeboat. A new scheme, dubbed BSPS2, has been set up, which people can choose to join. This will provide the same benefits as the current scheme, except that future annual increases will be lower.
All this has meant that the 130,000 members have a lot to think about in the runup to Christmas. Do they stay in the current scheme, which will move into the PPF, or switch to the new one? Meanwhile, around 40,000 of the members – typically non-pensioners more than a year away from retirement age – have a third option: they can “transfer out” – ie, take their pension elsewhere. Usually that means swapping future benefits in the scheme for a one-off sum that is transferred into a different arrangement. This week, it emerged that the scheme trustees have been shocked by the number of people – 12,200 – who have applied to transfer out to date.
The date for members to send their forms back is 22 December, which has triggered what has been dubbed a “feeding frenzy” among certain financial advisers, with some targeting individuals because of the fees – potentially tens of thousands of pounds – they can pocket from pension transfers.
MPs on the Commons work and pensions select committee are investigating the apparent scandal and were told that about 30,000 members have still not returned their forms. If they do nothing, they move into the PPF.
Around 90,000 scheme members are pensioners, 18,000 of whom are over 85 and 130 over 100. At a hearing on Wednesday, MPs were told some “aren’t capable of making these decisions on their own, sadly”.
There are huge sums at stake as some individuals have substantial pension pots – more than £1m in some cases.
Ahead of the hearing, the MPs said “retirement savings sharks” were reportedly circling around the scheme, which committee chairman Frank Field has described as a “honey pot for scammers”. The committee highlighted reports of unregulated “introducers” who were hanging around outside official seminars and offering hot meals to steelworkers as an inducement for them to go to a meeting to receive “advice”.
Meanwhile, in its written evidence, the PPF said it had “heard first-hand from BSPS members of instances of unscrupulous practices or, as members themselves have described it, ‘vultures’ touting for business”.
At the hearing, Megan Butler, a director of supervision at the Financial Conduct Authority, was asked by Field: “What have you been doing to get hold of the crooks?” She said four firms had stopped providing pensions advice “as a direct result of our intervention”, but was unable to name them. Field demanded the names be made public at the hearing, saying: “Megan, I’m really shocked that ... you don’t know these four firms that are ripping people off.”
Eventually Butler named three of the firms as Active Wealth, Pembrokeshire Mortgage Centre Limited and Mansion Park, but declined to name the fourth. Darren Reynolds, the director of Active Wealth (UK) Ltd, and Clive Howells, managing director of another firm, Celtic Wealth Management – which, it is understood, is not the fourth firm – had been invited to attend the hearing to give evidence, but failed to turn up.
The official website set up to help members states: “You should think carefully before transferring out ... Even though transfer values can seem large, transferring out is unlikely to give you as much total pension income as either the PPF or the new scheme on a like-for-like basis.”
