Lawyers acting for British Steel workers badly advised to pull out of their company pensions today said as much as £40 billion of people’s life savings have probably been wrongly transferred from generous defined benefit schemes by unscrupulous financial advisers.
When British Steel was extricating itself from the rapidly growing liabilities of the pension fund in 2017, it came to a regulated arrangement to offer the 104,000 members the option of staying in one of two company funds or opting to transfer out and have their savings managed privately.
One adviser to the workers estimates around 8000 transferred on the advice of IFAs, of whom 7,500 should not have done.
Al Rushe, an IFA working for the victims, said: “Many stand to lose hundreds of thousands of pounds and face being penniless by the time they hit 75. They’re paying out £12,000 a year in fees which is about the same as what they want to live on. If they’d stayed with the British Steel scheme they’d be on a guaranteed £18,000 or £20,000 a year for life.”
Today, around 100 steelworkers from Wales, Teesside and Scunthorpe descend on Westminster to explain their plight to a cross party working group of MPs and representatives from all the main regulators.
Philippa Hann, managing director of law firm Clarke Willmott, which is representing 450 of them, said IFAs advised workers to transfer into private schemes because of the prospect of big annual fees for the lifetime of the client. “Transfer 100 workers’s pensions and you can spend the rest of your life on the golfcourse,” she said. “It was just too tempting.”
But, she added: “This is much, much bigger than British Steel. People are vulnerable to exploitation by greedy financial advisers at many other employers, too. Military pensions, Welsh Water, Debenhams, Bosch, Sony, all are going through potentially similar experiences.”
She said she wanted to persuade regulators to make good all the British Steel workers left out of pocket and make regulators act to prevent similar debacles happening elsewhere.
“We cannot allow billions of pounds to be taken in this way. It has to stop.”
Representatives of the Financial Services Compensation Scheme, the Financial Ombudsman Service, the Financial Conduct Authority, the Pensions Regulator and the Pensions Ombudsman will all be at the Westminster summit.
Topics will range from ways to tackle unscrupulous claims management companies preying on misselling victims, an increase in the levy on IFAs and the need to ban IFAs from practicing without professional indemnity cover on previous years’ advice. Rushe said that, of the 42 advisers that gave bad advice, only one had full PI cover for victims to claim against.
Hann and Rushe will also call for the FCA to spend far more time and money out in British Steel towns explaining to those who opted out that they have probably been missold and should seek redress.