Almost 80pc of workers who transferred out of the British Steel pension scheme following the closure of the Port Talbot works were given bad advice, the City watchdog has said.
Thousands fell victims to firms preying on their generous “final salary” pensions, encouraging them to transfer to new pots and levying large fees for the privilege. Almost 8,000 members opted to transfer their life savings.
But in most cases workers were left out of pocket, exiting pensions that provided guaranteed income for life in favour of lower-paying annuities or self-managed pots, the Financial Conduct Authority said.
It found the transfer advice provided by firms was suitable in just 21pc of cases. Almost half appeared to be unsuitable and to the detriment of the savers, while 32pc appeared to contain information gaps.
The FCA said it intended to write directly to all former members of the pension scheme who transferred out, informing them of their findings. It said this will help them revisit the advice they received and complain if they have concerns.
Many received poor advice from firms charging “contingent fees”, charging only if the client transferred their pension. This model can create an incentive for advisers to recommend moving the pension, even when it is not in the client’s best interests.
The financial regulator announced on Friday it has banned the fee model for most pension transfer advice, after consumers were found to be losing out to the tune of £2bn a year, with advice firms ranking in up to £10,500 on each completed transfer, based on an average £350,000 transfer value.
More than 100,000 members of the British Steel pension scheme, one of Britain's largest, had to choose what happened to their savings after sponsor company Tata Steel decided to sell the British steel business in 2016 and offload its pension plan as part of a deal agreed with the Pensions Regulator.