COMMONS

British Steel Pension Scheme: a 'honeypot for scammers'

12 December 2017

Retirement savings sharks are reportedly circling around the British Steel Pension Scheme, a “honeypot for scammers”  as our Chair has described it. One steelworker is reported to have missed out on £200k of pension transfer value after being introduced and advised by the firms we hear from this week.

The two firms were identified by another of our witnesses as providing “questionable advice” to steelworkers thinking of transferring out of the scheme, and indeed one of the firms, Active Wealth, had its permission to accept new pension business suspended by the FCA. Tactics are reported to include unregulated “introducers” who put clients in touch with selected advisors,  and offering chicken and chips lunches to steelworkers as an inducement to hear advice options.

Mischaracterisation of value and viability of PPF payments

The PPF’s evidence describe their concerns about the reported unscrupulous behaviours of some IFAs, including mischaracterisation of the value and viability of PPF payments in order to unsettle and ‘sow fear’ among clients, and scheme members’ first-hand accounts of being approached by transfer-touting ‘vultures’ at scheme roadshow events.

Steelworkers face a series of choices

The steelworkers face a series of choices as they decide whether to transfer into the New BSPS, into the PPF  - or to take their pension elsewhere. Despite regulators being clear that the presumption should be against transferring out valuable DB entitlements, the PPF points to instances of IFAs touting for transfer business through the media, contributing to a climate in which transferring out is the ‘default position’, putting members at risk of making poor choices.

These concerns are echoed by the evidence from the British Steel Pension Members Group evidence, a social media platform created by and for scheme members to share information, support and views. The group's written evidence sets out the array of factors that have resulted in current and former steelworkers, who were previously counting on their pension scheme to deliver a secure and predictable retirement income, being confronted with complex, irrevocable and potentially life-changing financial decisions within a highly pressurised timescale and often with inadequate information.

The Group confirmed that individual 'Time to Choose' option packs, meant to give the 130,000 scheme members the information they need to make a choice, in many cases "arrived with little or no personalised information" and in some cases still haven't been received. Members and their financial advisers have struggled to get information from a scheme pension office "overwhelmed" by the volume of calls and e-mails.

The Group describes the surge in demand for transfers out as a “fight or flight” response, stoked by ‘mind-blowingly large’ transfer values, peer pressure and promotional activity by intermediaries. Faced with a shortage of reputable local IFAs with capacity to take on new business, scheme members have been set on a "turbulent journey which left them vulnerable to dubious advisers and unsuitable financial advice".

According to the Group, the pressurised atmosphere surrounding the process has left members feeling a mixture of "anger, anxiety, despair, pessimism and uncertainty."

The PPF has also received ‘startling’ inquiries from IFAs seeking cash transfer values on behalf of their clients – despite the law being clear that PPF members cannot cash out their entitlements from the lifeboat.

Witnesses

Wednesday 13 December 2017, The Wilson Room, Portcullis House

At 9.30am

At 10.05am

At 10.30am

At 10.55am

Further information

Image: iStockphoto

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