STEELWORKERS were “shamelessly bamboozled” by “parasitical” finance chiefs who pushed them into joining a risky cash-out retirement scheme, MPs reported yesterday.
The work and pensions committee said members of the British Steel Pension Scheme (BSPS) had been “exploited for cynical personal gain by dubious financial advisers in tandem with parasitical so-called ‘introducers’.”
Steelworkers below pension age were encouraged to transfer their defined benefit pension rights into a defined contribution pension — a process known as a “DB transfer.”
Such arrangements offer readier access to cash — but are rarely in pensioners’ interests, because it means giving up stable benefits in favour of a riskier investment.
The committee’s report said the scheme had offered the “perfect conditions for vultures to take advantage.”
Steel trade unions Unite, GMB and Community welcomed the report, calling for regulators to “toughen up when it comes to shutting down irresponsible financial advisers.”
In a joint statement, the unions said they had “repeatedly called for government to take action” to ensure a better deal.
“We will continue to support our members who believe they have been ripped off and will keep lobbying government and regulators to ensure measures are put in place so that such a scandal can never again be allowed to happen.”
The report brands the phenomenon “another major mis-selling scandal.”
Under a deal to save Tata Steel UK — whose employees were in the pension plan — workers were asked to choose between two schemes which offered inferior benefits to the BSPS.
According to the report, “faced with making a life-changing choice in a hurry, many members were attracted to a third option of a DB transfer.”
Many BSPS members were driven into signing up to ongoing adviser fees and unsuitable funds.
Since March 2017 the scheme has processed 2,600 pension transfers to a total value of £1.1 billion.
The committee heard of advice fees typically around 2 per cent of the transfer value and “punitive” exit penalties ranging from 5 per cent to as high as 10 per cent.
Committee chairman Frank Field said: “Once again we find the Pensions Regulator fiddling while Rome burns, when it should have seen this rip-off coming.
“All the responsible authorities must act, now, to stop more people being cheated.”
Labour shadow pensions minister Jack Dromey said: “It is a national scandal that the government and regulators failed to protect the interests of those with British Steel pensions.
“It has long been clear that ministers were asleep at the wheel, choosing time and time again to ignore our warnings and those from steelworkers, their unions and pensions experts — that people risked being cheated out of their pensions.”
A spokesman for the Pensions Regulator said it had reviewed communications sent to members about their options and was satisfied they properly warned of the dangers of poor financial advice and scams.
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