A recent review into the British Steel scandal found that mistakes made by Tata Steel and regulators put steelworkers at risk of mis-selling when it came to their pensions.
British Steel scandal
The British Steel Pension Scheme (BSPS) hit the headlines when a huge Tata Steel merger left steelworkers’ pension pots up in the air.
Steelworkers were given the choice to join the new pension scheme, BSPS2, or transfer their pension pot into a fund of their choice. The majority of BSPS members do not have an extensive knowledge of investments. Those who decided to transfer out had to seek advice from an Independent Financial Adviser (IFA), which is where problems arose.
Many unregulated IFAs took advantage of the situation. They gained the trust of unknowing steelworkers, then convinced them to transfer into entirely unsuitable schemes. In some cases, hundreds of thousands of pounds changed hands. You can read more about the scheme and mis-selling here.
Regulators are now working to correct this, though some may never be fully compensated.
The review
A review was carried out by Caroline Rookes. Rookes is the ex-director of private pensions at the Department of Work and Pensions. She is also the ex-chief executive of the Money Advice Service.
Her review found that the key failing in the scandal was the lack of communication between regulators, Tata Steel and BSPS members.
Regulators and Tata Steel
She named The Pension Regulator (TPR), the Financial Conduct Authority (FCA), the Pension Protection Fund (PPF) and the Single Financial Guidance Body (SFGB) as bodies who could have prevented the level of mis-selling that occurred.
Regulators could have assisted Tata Steel in educating BSPS members on the risks of pension transfers, however, they did not.
It was found that Tata Steel was also to blame due to the lack of information offered to steelworkers. Steelworkers also found answers to their queries inadequate and inconsistent. As a result, they were left with no confidence in the Tata Steel trustees.
Our thoughts
We welcome the report’s findings.
Steelworkers were forced to make a huge decision on their pension pots. Many had no prior investment knowledge and were unaware the ‘better’ offer they received from unregulated IFAs were unsuitable and in some cases, fabricated.
Billions of pounds were put at risk, with Tata Steel and regulators not supporting steelworkers adequately.
Did you transfer into a Sipp from your British Steel pension? Get in touch as you may have fallen victim to financial mis-selling.